Well Priced Properties Go FAST!

For nearly a year now, the real estate market has been in a state of near neutral conditions, favoring  the buyers or sellers with a sliding scale from entry level slightly favoring sellers to upper end slightly favoring buyers. That has not changed even with the COVID-19 pandemic. A well priced property will sell and if that property is priced below the local median it will sell quickly. Local median prices fluctuate in Clark County between $350k and $450k depending on the area.

There is an opportunity for sellers and buyers in that the overall market is slower than normal, there are fewer homes being listed and fewer buyers bidding. So pricing is steady but the atmosphere is a bit more relaxed. It's a good time to be a buyer or seller because your agent should have a little extra time since volume is down.

There is always opportunity in real estate when you keep your eyes peeled for it. One part of the market that seems to be softening up is the fixers. Most buyers right now are looking for something turn key, move in ready. So looking for something that needs a little TLC could produce an opportunity to get a bargain. Don't expect a crazy bargain though, this market is too large to let a good deal go unnoticed.

Stay safe and let's hope the Governor's phase 2 plan gives us a little more room to stretch out.

Steady as she goes, Captain

Throughout all the doom and gloom COVID 19 this and that, the local real estate market chugs along. Volume is way down but it is down on both sides of the market, supply is down and demand is down and it seems in a nearly equal fashion.

Prices are holding steady and the market will survive this providing we can get back to work in May. I am holding out hope that the Governor here in Washington State will hold the line at the current "stay home" mandate till May 4th and then relax things so people can return to some sense of normality as well as normal income flow.

Everything set on the shoulders of america's governors and the Feds as they decide whether to extend the "crisis" or put us back to work. Stay tuned America, this is big.

Gentrification Revisited

original published 11/30/2018, by Rod Sager

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

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

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

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

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

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

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

Gentrification of Downtown

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

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

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

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

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

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

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

Analyst Projections are Softening for 2018

The overall Portland Metro area has already seen a slowdown in the rate of price appreciation in the first 1/3 of 2018. There is near unanimous analyst agreements that market conditions will soften as the year progresses. For buyers that may not seem like the case especially resale buyers in places like Portland, where inventory remains critically tight.

A low inventory definitely tips the scales towards sellers int he supply and demand view of economics, but demand in real estate is a little different than demand in many other commodities. Demand for real estate is almost always high, but the problem isn't that there aren't ready and willing buyers, there are plenty; the problem is that there are many "able" buyers.

The greater Portland-Vancouver market has seen housing price growth so outstrip income growth that many ready and willing buyers are simply no longer able. Many sellers still believe they can list their home for a sky high price because they have a "rare" commodity. But having something rare still requires having more buyers than sellers. For example, if I have a rare and desirable item that I price so high no one can afford it, I will not sell it, even if it is the only one on Earth.

One real classic trap that I see seller's right now falling into is the chasing down the market. Last year a seller could float a high price above market and get away with it. Buyers outnumbered sellers so much that someone would always step up and make an offer close enough to close. But now I am seeing, and the analysts have confirmed, that strategy is leading to a series of price reductions from sellers.

A series of price reductions puts buyers in a position of strength against sellers. As interest rates rise the pool of eligible buyers shrinks. Sellers are well advised to price their home at market pricing because higher interest rates reduce the buying power of prospects for the home. Remember inventory IS in short supply, but recent conditions have also reduce the supply of "able" buyers. This local market is moving into a neutral status where it is neither a seller's or buyer's market. I still think current conditions tend to favor sellers, but another few upticks in interest rates could level the field.

For younger buyers that have never seen a mortgage rate above 6 percent, I'll tell you this. The 50 year average rate on a home loan is still above 6%. Young people have seen these historic low rates as the "norm" when in fact this has been an abnormal decade for interest rates which are now beginning to normalize. Paying 6% on a mortgage loan is still reasonable when compared to the long term averages.

That however does not mean the buyers shouldn't try to score a house while rates remain lower than 6%. Interest rate is a much bigger impediment to buying a house than price. Interest rates will likely rise faster than prices this year, so buyers should focus on their ability to pay, not trying to grind out the lowest price on a house.

So overall Clark County, Washington saw roughly 10% growth in the median home price from 2017 to 2018, most analysts are projecting 2018-19 growth to be about 1/3 that in the 3% range. So prices are still rising, but not at the rate they were last year. Incomes are the limiting factor. For buyers, the price slowdown may feel like a reprieve, but combined with the up creep in rates the purchasing power will make the market "feel" like it's rising just as fast as last year.

Sellers need to be cautious, analysts are not the end all be all. Market conditions can be fragile, and they are in my opinion fragile right now. If national and local economic indicators remain strong most of the analyst projections will likely pan out, but any negative economic factors could lead us back to a buyers market. Sellers: A bird in the hand is better than two in bush, in 2018.

Time to Revisit Interest Rates

I have been warning of rising rates for several years and the Fed tried to keep a lid on rates to help the economy. The economy is now moving very well. Strong enough that inflation worries have now replaced economic worries. This has led to actual treasury bill increases and a strong tug on rates is underway. There has been a slow but steady increase in mortgage rates since late last fall and this is expected to continue.

 Many buyers are still trying to find a house they can afford. I can't help but notice that some buyers remain hesitant to buy a house and often over a trivial matter. That is all fine and well but the train is leaving the station, and some will be left standing on the platform.

Here is the deal. The rise in rates has been slow and steady. It isn't enough to turn the market around and cause prices to fall. It is however enough to slow the rate of price growth. Most analysts are predicting a much more modest gain in pricing in 2018 than we had in both 2016 and 17. But prices are still expected to rise and more importantly the cost of borrowing money will go up. Borrowing is a much larger burden than price.

Let's look at a scenario. Sally and Bob get approved for a loan in February for $300,000. The loan officer has qualified them based on their income and debt load. Let's say that they have an income of $5,000 per month. So they qualify for $1450 a month plus taxes and insurance at 4%. Now let's say rates continue to rise at their current pace. By May they will no longer be able to get 4%. Now rates are at 4.5% Now the PI payment is $1520. They will have to come in with extra cash to "buy down" the rate or settle for less house. But the homes are a little more money now. So prices have risen by 1% and their borrowing power has dropped to $282,500. So the house went up $3000 and the loan went down $17,500. They have literally lost $20,000 in buying power in couple of months.

This is the scenario that is building into the market now. Buyers are not the only ones that need to be concerned. Sellers looking to sell the current house and buy another one may find themselves in a pickle if they keep waiting to sell their house. Inventory is squeaky tight right now and buyers are ready to snatch up seller's listings, yet sellers are sitting on the hands. Meanwhile, what ever house the seller plans to buy after finally selling their current house, will end up costing them more in the form of higher rates.

Cash buyers are of course somewhat immune to the interest rate issue. In fact rising rates help the cash buyer as it tend to slow down the rate of growth in pricing. Steep increases in mortgage rates can lead to lower housing prices.

Interest rates are far more destructive to buyers than price. Keep that in mind as we watch rates start to move up towards the more typical 5-6%. Rates have been at or near historic lows for the last 8 years and things are beginning to return to normal. 

2018 off to a good start

OK I'll admit that title is anecdotal. But I am seeing a nice flow of listings and buyers poking around, finding homes, and making offers. Many analysts feel that 2018 will slow the crazy pace in the real estate market to a more healthy and normal 4-5% price appreciation over the course of the year. This is fine by me.

I think the fact that the "threat" of higher rates is now the reality of higher rates, people that we dangling their feet over the fence are starting to jump in. I have made the point time and again that rates are far more important the price. Most people will pay far more in interest than any price deal they might negotiate.

The federal tax revisions that take effect this tax year (2018) many middle income earners will no longer need to itemize and as such the mortgage deduction will no longer benefit them. A married couple paying less than $20,000 a year in mortgage interest may not have enough itemized deductions to exceed the new and improved standard deduction of $24,000 for a family.

As I always state my standard disclosure anytime taxation is discussed: always consult a professional tax prepared or CPA when making decisions based on taxation. That out of the way, the new tax law increased the standard deduction for a married couple from $12,000 to a whopping $24,000. W2 wage earners are those who have a job and the boss cuts a paycheck, withholding money for taxes. W2 wage earners will receive a standard deduction of $24,000 for a married couples and $12,000 for single filers. This is nearly double from previous years! In general this is a good thing. But in order for it to matter you must have more than $24,000 in deductions for a couple or $12,000 for single. That may be a problem for some.

Lets look at a hypothetical taxpayer for a moment, we shall call her Sally.

Sally made $40,000 in 2017 and has a mortgage of $200,000 on her home. She paid $8,700 in interest last year. The standard deduction for 2017 was $6,350. Her mortgage interest exceeds that so filing the "long form" IRS 1040 with a schedule A for itemized deductions makes sense. Why take the standard $6,350 when you have $8,700 in mortgage interest alone. Now Sally can also write off other job related and business expenses. Here is where talking to the tax pro is CRITICAL. Sally needs to make sure that she doesn't take deductions that are not supported by the IRS. OK Sally is smart and she has a trusted tax pro handling her filing each year and he helped her find an additional $2,200 in legit tax deductions. No Sally can't write off those coffee break lattes ;)

Now two 'problems' will arise for Sally this year. First the amount of interest paid on a mortgages drops each year as the balance is reduced. Let's say Sally will pay $8,500 in interest in 2018. She will likely have a similar amount of other deductions. So at the end of the year she has $10,700 in deductions which is now less than the new standard deduction of $12,000. The good news is, Sally will get a larger deduction and save the extra expenses of having to file the schedule A. Her tax guy is not happy, but Sally is. But now for many the extra bonus value of home ownership that was an effective tax break, has been eliminated for those with smaller mortgages.

This could have a net effect of slowing down some of the pressure on entry level homes and first time home buyers. Of course the idea of home ownership should not revolve around tax deductions, but rather the idea of owning real property, gaining equity by reducing the balance on the loan and enjoying appreciation in price over time. These are really the hallmarks of home ownership. It's all about the equity asset and the lack of a landlord that can kick you out or raise your rent.

Over all the new tax system will be a bonus, but it could lead to some minor softening mostly near the bottom of the market. Frankly the bottom needs a little price relief anyway. 2018 is looking good.

Slight Softening could be Golden Opportunity

Prices are stable in the local market with modest appreciation in values. I am seeing a little bit of a bump in inventory which is a much needed softening of the heavy seller's market we battled last spring.

Buyers that were frustrated over the summer with multiple offers and aggressive competition for property in what was a very tight inventory situation, may find that things tempered a bit. It seems like the number of buyers has lightened a touch and a modest gain in sellers is leveling the market into a healthy near neutral condition that just slightly favors sellers.

This is more evident in the upper price ranges but even in the sub-median market I see openings for buyers. Interest rates are nudging up and that can lower the buying power of buyers. This current moderation in the market coupled with still very low mortgage rates could be a golden opportunity to strike a deal for a house.

The classic fence sitters are faced with an opportunity that may not be around by summer. With rates on government backed mortgages still in the low 4s, and a slight flattening in appreciation, the time is now for buyers. Buyers should remember that historically speaking, any rate under 6% is a "low" rate. We have been under 6% for a very long time so some people may be under the delusion that 5% is a "high" rate.

I have written on this very blog about the dangers of waiting for a better price in a rising rate market. Rate will almost always hurt the bottom line more than price. Most analysts are predicting a modest gain in values for 2018 and rates are trending up which amounts to the classic "double jeopardy" scenario.

Get off that fence!

Relaxing conditions, but not everwhere.

The red hot sizzling Portland Metro Real Estate market is showing a definitive relaxation as values have skyrocketed and buyers are starting to thin a little as they are priced out. But not all areas in our beautiful metro area have cooled their jets. Beaverton is still pretty crazy with values continuing to inch up and seemingly no shortage of buyers. Little ramblers from the 1960s and 70s that feature less than 1000 square feet in many cases are commanding middle 300s on price and that is pretty steep for entry level buyers.

More locally here in Clark County as I wrote last week, the craziness has for the most part subsided, but we are still experiencing increasing prices and buyers should not get too complacent. Sellers are a little easier to work with and that is refreshing. But buyers still need to act quickly when they find a house they really like.

Buyers should always remember that a well priced home will sell quickly, possibly with multiple offers. There are however those overpriced units I have referenced over the last few months and the market here in greater Vancouver is no longer supporting egregious overpricing. These are sellers that buyers can 'beat up' a bit. If a buyer is seeking some help with closing costs or just needs a sharper price, the overpriced house may be had for less. The seller may have it sit for a few weeks before considering a lower offer but at some point they will have to come to the market. The strategy of having the market come to them is waning as values are not increasing in annualized double digits any more. Buyers are well advised to have their agent run the numbers on homes that may be overpriced and make an offer accordingly.

I like this moderate, more healthy market. I think people on both sides of a real estate transaction make better decisions when neither side has a clear market advantage. I still feel that this Clark County, WA market in the sub-400k range favors sellers a bit, above 400k is pretty neutral.

Overall the real estate market is excellent.

Vancouver's Aggressive Apartment Construction, What does it Mean?

Vancouver is undergoing a major construction boom on apartments with some 800 units under construction and another 3700 in the pipeline. What does this mean for local real estate? The rental market in the greater Vancouver area has been under severe pressure as neighboring Portland has also had a huge crisis in the apartment market. That city is also pushing a fat pipeline of some 7000 units under construction and 15,000 proposed. The Portland crisis has spilled into neighboring cities like Beaverton, Gresham, and Vancouver driving demand higher here as well.

Rents were out of control for several years recently and that helped push the entry level real estate market to the brink of un-affordability. Now with some of the pressure off the rental market the housing resale market will likely settle in a bit. Frankly this is probably a good thing. As it is now, appraisers are a month out and lending may tighten a bit after the election.

Sellers in the entry level market under median ought to sell now and capitalize on a mini-peak in the sub-median market and get that mid market home while these super low rates are still in play. Renters still can buy a small house for not much more per month than the price of a two bedroom apartment. This is still a good time to buy with these low FHA and VA rates in the low to mid threes.

Metro Area Market Trends

I pulled some data from the National Association of Realtors® for the Portland-Vancouver Metro Area and the results are interesting but not surprising.

Many agents and media outlets have suggested the market is a raging bull and although in context it may be true. But the perception has been that it is a seller's market in the vein of 2005-2006 and that is simply not the case. Back before the crash in 2008-2009 it was a ridiculous seller's market. Homes were fetching whatever the seller wanted and condition was almost a moot point. Double digit appreciation was practically expected rather than being a gross anomaly like it really should be.

This current market is much different and frankly much healthier. yes we are in a seller's market. But sellers still have to present a quality product at a fair price. Over priced listings are NOT selling and that is a very definitive difference between 2005 and 2015.

Buyers are also showing reservations about homes that are in questionable neighborhoods or that need TLC as they say. The market is raging but only if you have a solid move in ready house in a conforming neighborhood. Other homes are are taking longer to sell. 

The media can sometimes make a mountain out of the proverbial mole hill and sometimes they underestimate things. It seems the story is not always what it seems.

We are in a healthy real estate market here in the Portland-Vancouver market. Values are rising in the 3-5% annual range and that is just dandy. If sellers want to have a vigorous multi-offer situation they need to be in a solid hot neighborhood AND they need to have that house looking real sharp. Sellers that are unwilling to comply with the conditions presented by the cold-hearted market will only find disappointment.

Buyers on the other hand, need to realize that the house they want, the clean and sharp beauty in the perfect neighborhood will not be on the market long. It will also sell for more than the asking price. Buyers making low offers on hot houses will also be met with frustration. 

The National Association of Realtors® has some projections for pricing over the next twelve months and the outlook is HEALTHY.

Inventory is Tight

Inventory is very tight right now in many markets across the country. Here in Clark County, Washington that is very much the case. Buyers are snatching up all the clean, well priced and move in ready properties in the first couple of days they are on the market. Multiple offers on these homes are becoming the normal rather than the exception.

When it comes to homes that need some attention and minor repairs, these tend to hang around a bit longer. These are the homes that buyers can acquire without getting into a bidding war with half the county. The market over the last year or so has been filled with eager buyers looking for move in ready properties. The fixers are not seeing the rush of buyers.

As a Realtor®, I often find myself with frustrated buyers that have been outbid or too slow to act to get a house. I try to show them properties that need a little TLC but are still financable but some buyers just don't want to deal with any "fixing". One idea that can help these buyers is to seek the fixers that have a willing seller and get the seller to make the repairs before closing. Buyers that are up against a financial barrier have to remember that they may not get the perfect move in ready, big house on the small dime. There are often choices between a smaller property that is cherry or a bigger property that needs a little work.

The important thing to realize is that as prices continue to nudge their way higher, the buyer only gets in a tighter spot. Unless that buyer gets a huge promotion or takes a new job making allot more money the housing prices are rising faster than income.

Some buyers need to consider buying a smaller home to start and then use the equity they gain over time to leverage a larger property a few years down the road. Real Estate can be a very good way to build wealth and having the benefit of both a home and an appreciating asset is a major step towards financial independence.    

As Prices Continue their Upward March, Buyers may be Left Behind

I have been harping on the idea of buyers sitting on the fence till they no longer qualify for several years now. And over the last 18 months I have watched as the required qualifications to buy an entry level home have crept up higher and higher. In 2011, I had no problems getting a pair of minimum wage earners into an entry level house. Now this is an unlikely scenario. Houses that were solid first time home buyer residences were selling at prices between $115,000 and $140,000. Now those very same houses are pushing through the $200k barrier.

Wages are rising at best 3% annually, but housing is well above 7%. How long before a buyer watches their dream home become unattainable? Three months? Six? A year? Too many entry level buyers lose opportunity by being too picky about their first house. I certainly understand that buying a house is a BIG deal. People are generally spending the largest sum of money they ever have spent when they buy a house. Having some pushy agent leaning on them is no comfort. But the reality is that the first house is almost always just that, the first house. Once a buyer has their first home they now enjoy the benefits of owning versus renting. They enjoy that appreciation working for them instead of against them, the reduction of principle through monthly payments, equity, control, and often there are tax advantages as well.

Waiting for the ideal house may work out for a buyer, but the odds favor sellers in a recovering market. Buyers should be cautious that the house they are buying is in solid condition, safe, etc. but they also should be mindful that perfection rarely rears its beautiful head and compromise today will likely reward fantastic dividends later.

Most first time home buyers end up making a compromise between what they had hoped for and ultimately what they were able to find and afford. The longer a buyer waits for the "ideal" property, the bigger that inevitable compromise will be. Sadly, for many the compromise will end up being no home purchase at all and back to the landlord they shall go.

I have lost clients that did not like to hear that side of the real estate reality and so they find another broker that sings a different tune. In the end, they almost always end up with the compromise I told them they would face or they scurry back to a rental property. Far more often however, my clients heed the call of the mark and end up gloriously better off later. The house at the top of this article was a "compromise" back in 2011. My client needed a fair amount of space for his two kids but a detached home was out of reach. Three years later the market delivered his salvation. He paid $118,000 for that townhouse and sold it last summer for $152,000. Now he has the detached house he always wanted in a neighborhood that was out of reach before. Patience and a small compromise today can often bring amazing rewards a short distance down the road of life.

From 2010 through the early part of 2012 buyers could be picky and they could kick sellers in the teeth. But that was then and this is now. Sellers run the show and buyers need to work the market very hard. Buyer's agents have their hands full trying find homes for their clients.

For home owners thinking about selling, this could be a golden moment with bold rays of sunshine beaming down from the heavens and angels shall sing... Many sellers have found that their previously upside-down home is now in the clear and there are buyers lining up to make offers.

Real estate has always been an opportunistic endeavor. For buyers it is about beating the closing window of opportunity and for sellers it is about getting in while the buyers are frothing at the mouth for inventory. Is that a golden ray of sunlight I see? Hark! can you hear a hymn of fortuity singing down from the heavens?

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.

This article has been excerpted from CNN/Money in its entirety

By Les Christie @CNNMoney November 14, 2014: 3:42 PM ET

Affording a home is getting more difficult these days.

According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), nearly 62% of all homes sold nationwide last quarter could be afforded by a family earning the national median income. Two years ago -- when affordability peaked -- 78% of people could afford homes.

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.

Economic Indicators are Trending Up; "Op Window" is Closing

Many market analysts are mildly bullish on the numbers coming out of the marketplace as we enter the final quarter of 2014. For me personally as a Realtor®, this was my strongest year ever. I enjoyed sales that were even better than the pre-crash heyday of the mid-2000s. Low interest rates and improving consumer confidence has made conditions for real estate ripe over the last two years. In 2011 through the middle of 2013 the first time home buyer segment was roaring. Prices were still a little depressed and rates were low so people that had been long priced out of the market saw a rare opportunity to own real estate. Economic recovery and confidence has led to a spill over into the middle and upper end markets.

Looking forward; the strong potential for the economy to swing into a more robust growth could lead to rising interest rates. If the rates get too high, they can have a negative effect on real estate sales and appreciation can slow. The "op window" for many buyers may be closing. Prices have swollen over the last two years by nearly 20%. If rates were to get closer to the 30 year average and settle in at 6%-6.5%, many entry level buyers will find themselves priced out. A strong economy is a good thing and even higher interest rates are worth having when strong job growth and higher incomes are part of the equation. Right now, buyers are in the open window of opportunity. They can lock in a low interest rate that can save them tens of thousands of dollars over the life of the loan before the improving economy drives prices and rates up.

Fear and uncertainty are what keep people from buying real estate. But no matter what, people need a place to live and buying right now for many people is just as affordable as renting. As the economic conditions improve the cost to own will rise faster than the cost of rent and that window will close as well. It is a good time to buy and a good time to sell.  

This was published by Kiplinger this month:

By David Payne

The economy looks better than was previously thought: Look for about 3.5% growth at an annual rate in the third quarter, driven by motor vehicle sales, business equipment, exports and nonresidential construction. A likely upward revision of second-quarter growth to near 5.0% after a dismal first quarter (a -2.1% growth rate) is also likely. In the fourth quarter and into 2015, growth should settle down to a 3.0% rate. That would mean average GDP this year would be about 2.2% over the average for 2013.

Setting the stage for more sustained growth in coming months: After wringing out inflation, disposable income grew at a strong 4.0% annualized rate from December 2013 through July 2014. Consumer confidence is at its highest level since before the recession. Motor vehicle sales in July hit their highest level in over eight years. An index of manufacturing activity points to strongly expanding output. New orders for business equipment have climbed 13 percent at an annual rate since May, indicating strength in business investment spending. Plus, hiring is on the rise, layoffs are scarce (indicated by a very low rate of initial unemployment claims since May), and retail sales have rebounded.

And growth may accelerate more dramatically through 2015. Improving business confidence could push investment growth back up. Consumer spending and confidence remain below what would be considered normal levels by the standards of past economic expansions. As job growth returns and consumers feel more secure, more robust income and spending increases may well be triggered, pushing second-half growth over the expected 3% pace. While that happening in what remains of this year is an outside chance, it’s a good bet that in 2015 such a virtuous cycle will kick in.

There is a slight possibility that rising interest rates next year could have a mild depressive effect, knocking growth down from an above-average (better than a 3%) rate to a simply average (2.5%) pace. For now, however, we expect that the likely small increase of a quarter- or half-percentage point in rates won’t have much impact on GDP growth.

Spring Market Trends

Trends for the $200k-$400k market

The market is just moseying along at a nice comfortable pace. Inventory numbers show a bit of a spike in the middle of the market. The bottom is still hot but the middle is now starting to see solid and promising activity. Between $200,000-$400,000; new listings, pending units, sold units are looking favorably up with a median price running flat since the start of the year. One statistic that is intriguing in this middle market analysis is the price change differential. This indicates how much less than list price homes sold. That is trending down which means more full price or near full price offers are coming in. Once the middle gets some good traction we will see the top of the market begin to swell a bit also.

Trends for the $200k-$400k market

2014 is shaping up to be a healthy market. I do not expect explosive growth like we had in 2013 but I am very optimistic about the overall trends that seem to be forming now.

I have also seen a nice surge in the $275k-$325k new home market with builders offering a little more inventory in that middle upscale market. The move up market can drive both the top and bottom and I feel that it is critical to see positive movement in this area.  Buyers are out there and they seem to be jumping in cautiously but in good numbers.

Buyers also seem to be continuing the trend of spending less than the bank will offer. The mid 2000s saw buyers using every dime of borrowable assets but lately I see a trend to leave some on the table. Caution after a rough market crash that is only five years in the rear view mirror.

This is a great time to list a home and it is still a good time to jump in and buy.

Long term land prices could get hot.

It has been an amazing half-decade these last five years. After the "crash" it seemed as though Clark County, WA had a lifetime supply of ready to build lots owned by a variety of investment and banking groups. Yet suddenly we find our selves in a bit of a land crunch. Developers are trying to find new build able parcels and are finding that market increasingly tight.

The politics in the area have long been running towards sustainable, non-urban sprawl. It has become necessary for builders to look at urban infill projects and higher densities. The further belabor the issue, the State has created new requirements for storm water mitigation on new subdivisions. All of this leads to higher land prices and greater expense passed on to the buyer of new homes.

Those buyers wishing to take advantage of low interest rates on a brand new home should step up the pace as prices will likely rise faster on new construction than resales. That said, the resale market will benefit long term from increased building costs. The more expensive new homes become the more people will turn to resale property to meet their needs. Furthermore, urban infill on small lots is not for everyone and many families will choose and older home on a big 10,000 foot lot over a newer homes stuffed into a neighborhood like anchovies in a can, on 4,000 foot lots.

The real estate market is in a dynamic flux moment, hey that sounds really cool. What I mean is that we are on the precipice of a shift in they way our community will grow. Clark County has hung on to suburbia and rural development but alas, the time is near that builders will need to move towards a more urban profile in their projects. We have already seen this paradigm shift over the last decade, particularly in Vancouver and that will spill over to much of the county as time marches on.


To the left is the current Urban Growth Boundary map for Clark County. There are still some areas of nice flat build able land, but pickens' are getting slim and that has the building community a little edgy.

In the end build able land will become increasingly expensive and builders will either have to build more dense or more expensive. Any opportunity that a buyer has to acquire property now will likely be money well invested for the future. Interest rates remain low and prices, although on the rise are still below the levels of 2007. This adds up to a great value proposition.

Got 300 Grand? If so, this market will treat you well.

This is a somewhat anecdotal post but I can back it up with some sound data so here I go. It seems that this market has gotten quite hot at or near the bottom of the price range. $150k-200k homes are selling fast and often with multiple offers. For those of you fortunate enough to have a little larger budget the buyer's market has not died just yet. There is a more inventory and fewer buyers and that seems to have created a more buyer-seller neutrality based market. Right about $275,000 things begin to loosen up. Buyers can kick a few tires and be patient as the try to find the perfect home at the best price. Let there be no mistake a well priced home at $300k will sell fast, but a home that is pushing the price ceiling may sit around for a while.

If you are a buyer, you have to try and balance the price and threat of higher interest rates as you decide your path. As a seller you have the same potential problem. If a seller chooses to hold out for a higher price, they may get it, or they may lose out all together if interest rates are uncooperative.

The primary idea is that those of you looking at spending $275k or more can probably find a great house at a pretty good value. This is good news.

According to local MLS data, the last 90 days in Clark County, Washington had 447 active units between $275k and $375k and only 189 active units in the bread and butter $150k-$200k price range. Inventory is very tight at 1.9 months for entry level but a more healthy and neutral 4 months for the high price range. This is an opportunity for people sitting on a three bedroom 1300 foot ranch to get top dollar and then step up to the dream 2200 foot, four bedroom house that is still priced relatively cheap.

interest rates are still very low. We had a spike over the last six weeks but favorable news coming from the fed yesterday has settled things down. The Freddie Mac Washington State average rate is currently 4.21%. Most people looking for a low cost loan are going to pay closer to 4.75%. any rate under 6% is historically a good rate so we remain well below that.

get out there and kick some tires. you might find your dream house and it might be cheaper than you think.

Keeping an Eye on the Market

I wrote this article for the Equity Northwest Properties Blog this morning and decided to re-post it here for you.

There is a huge inventory of homes that were purchased at or near the height of the market from 2004-2008. The average homeowner moves every seven years so many of these homeowners that bought at the peak are getting towards that "time to move" point. The problem is that values for many of them are still not quite high enough to clear the loan obligation. Many of these would be sellers are sitting on the fence patiently waiting for the market to yield the price they need to exit clean.

For Realtors® and sellers this is a 'watch the market' time. We enjoyed a robust 8-12% gain in values over the last twelve months. If this upward pricing trend continues, many homeowners will finally exit the proverbial tunnel and be able to sell their home and clear all liens and fees.

Our local market and many other markets around the nation are seeing tight inventory, especially in the entry level price range. This is driving an increase in price. Low interest rates are also helping to keep demand relatively high. As these 'top of the market' homes become viable to sell again, we will see less of a squeeze on inventory. This can be a bit precarious, too much inventory may cause prices to flatten out if demand does not keep up. So long as interest rates remain at or below 5%, I believe the market will continue its growth, even if inventory levels fatten up. A combination of higher rates in the more normal range of 6-7% and bulkier inventory would likely cause the prices to stop rising or at least severely slow down.

What does all this really mean? For buyers that really want to own, rather than rent, now is truly the time to buy. Rates are low and there is no guarantee they will remain low. Prices are rising but still relatively low. For sellers, things are a little dicey at the moment. Selling now could be the genius move of the decade or it could be one of those "oops" I should have waited situations. No one really knows what this fragile market will do. If you are a owner occupant seller and you actually want to move then selling as soon as possible makes sense. If you are selling based on an investment then you are forced to gamble a bit. Wait or sell? For an investor I would wait a little longer but of course that may or may not pan out. In the end, I believe real estate should be a long term investment and waiting will rarely cost you money, it may just cost you some time.

Sellers and would be sellers should remain 'market engaged'. In other words, pay attention. Things are moving in generally positive directions and the opportunity to sell will present itself soon. Potential sellers should stay in contact with their favorite agent or broker and 'keep and eye on the market'.