Top of Housing Range is still on the Brakes

Locally the real estate market continue to apply the brakes on properties listed at 120% of median or more. Below that threshold there is not much available in the new construction so those median and under price points still see a lot of activity. Up higher in the price ranges things are crawling with price reductions and a strong move towards a buyer's advantage. This is one of those moments in the market place where a seller of the median or lower price point home can sell high and then go beat up the seller of a more expensive home. These market opportunities to move up and save are rare coming around every few years during transition phases like we have right now.

If the Washington DC is successful in keeping the Federal Reserve on a low interest track we may see this opportunity vanish. I cannot overstate that a seller with a house fairly priced under $350k will probably get multiple offers and/or sell quickly for full price and then can take that equity and apply it towards a high priced home in the $500,000 range and find far less seller resistance to discounts. The market can do several things among them the most likely path is a continuance of the seller's market strength at the entry level and neutral to buyer's market conditions the higher up the price range you go. But the gap could close and new buyers riding low rates could put pressure back on the higher ranges tightening the top of the range back to neutral or even mild buyer's favor. Or the market could slide further and start eroding the entry level should interest rates start moving up again. In either case the incentive for an entry level homeowner to sell and move up to a larger more expensive house is very strong. Sellers in the upper end are in a less obvious situation and will have to make a call on what the market may or may not do.

Sellers of larger homes are in a tough spot right now. Builders are producing large family style two story houses that compete directly with older resales. Those looking to downsize are in a tough spot as buyers are in control on the upper end large house market and sellers rule the bottom. Pricing in the upper end does not appear to be contracting, but rather just riding the brakes with nominal appreciation and that has led buyers to lose that sense of urgency.

Buyers at the entry level however must remain vigilant because there is far less inventory under $400k than there is buyers and that means a well priced small ranch house in the low $300's is gone before the ink is dry on the listing forms.

The real estate market is rarely in sync at all levels and neighborhoods, so staying in contact with your preferred professional Realtor® is always wise advice.

Clark County Sales still Robust

Despite the general feeling of a market slow down, Clark County still pushed out nearly 700 sales last month (699). The median price including mannys and condos was 356k, but 3/4 of the units were between 250k and 400k the 'meaty' median range. There is little inventory in the sub 250k range and plenty of inventory above 500k so the market remains solid and close to neutral, if you are trading in the middle.

Buyers in the entry level will continue to struggle as rising rates and virtually no inventory make that sub 250k market a rough ride. That is not to say buyers should flee the market, in fact they simply need to be patient and willing to settle for a quality property even if it isn't exactly what they want. So long as jobs remain plentiful and wages continue to rise, demand remains for homes and prices will rise over time. Getting in now lets that entry level buyer enjoy some market appreciation so that later on they can make the move up with equity in the starter home.

Buyers at the other end can kick some tires and beat down sellers as inventory levels are actually pretty high. That doesn't mean that every upper end home is overpriced. In fact a well priced home in the 750k plus range will still find a buyer in a reasonably short time. It is the large homes that are dated, odd style, or otherwise non-traditional that are filling up the inventory and remain ripe for a discount.

Sellers in the upper price range should have no delusions about the value of their home. Price per square foot is nearly useless in the upper end. Upgrades, materials, build quality, neighborhood, design, age, and numerous other factors can dramatically effect high end homes causing widespread variance in price per foot.

This market remains healthy with modest appreciation, tight but manageable inventory levels in all but the very bottom, and interest rates that are still relatively low despite constant creep up all year long.

It's all good friends.

Remodeling? Trendy is Short Term

I see many remodels happening out there. Many homeowners are flush with equity as our market has been solid for a number of years. Personally I have been taking care of some deferred maintenance on my own home. We recently painted our house which it really needed. We are also going to do some light remodeling.

I believe it is wise to be very cautious remodeling to trendy styles unless you are remodeling to sell or you tend to remodel often. Trendy is just that, a trend and trends change rapidly. The style market doesn't care how much you spent on that carpet or flooring, like all markets it is cold and unconcerned with your wallet or feelings.

If you are remodeling for the long haul, sticking to classic and timeless never hurts. The flashy color schemes and cabinet styles of today will look dated in a decade. Sometimes styles come back and sometimes they go away for ever. I don't think those 1980s parachute pants are ever coming back ;)

For those old enough to remember, the 1970s was the era of 'wall to wall' carpeting. Many homeowners carpeted over their beautiful hardwood floors to be in on the trend. Wall to wall carpet was sold in new homes as a positive feature when in reality it was a cheaper solution for the home builders. As we all know now, wood and wood laminate surfaces have been back in style for quite awhile and are likely to remain so. They also never really went out of style even in the 70s.

Think about enduring styles that never seem to go out of favor when remodeling your home for the long game. Trendy works very well for someone trying to sell, but trendy can fade away in short time. That parachute pants craze only lasted a couple of years, but everyone remembers them, for better or worse, mostly worse.

A few tips for maximum enjoyment and timeless style. Generous use of wood or wood laminate surfaces and don't skimp here. Don't use the cheap $1.29 a foot garbage. Step up to at least the $2.50/foot grade and preferably the best laminates are closer to $5/foot, the install labor is about the same for cheap laminate as it is for the good stuff. Avoid trendy wood patterns as that will look dated as well. remember the parquet floors of the eighties? Those are always in fashion on the basketball court, not so much in your home. Bamboo has been trendy but what will you think of it in 2025?Large area rugs rarely go out of style as long as they are in the classic vein.

In the kitchen white never goes out of style, especially here in the Pacific Northwest. White in the kitchen is actually coming in as trendy at the moment, but even several years ago when dark woods were the rage a white kitchen was still good. White is light and bright and most people prefer a bright kitchen.

In general light and bright is ideal in a home. An exception would be a classic 'library' style den or a movie room. Dark rooms are not inviting in any era.

Minimalism is always in fashion. Clutter is always clutter and few people want to living in a packed junk store. Having lots of 'negative' space gives the mind a chance to relax and relaxation is typically a good element of design for a home.

For the interior walls light and bright and neutral rules the day in any era. Off whites, taupe, or gray is always in fashion. Remember trendy comes and goes, but some things are always OK. In the late 1980s the rage was mauve and burgundy in the home. It was every where. But it went out of fashion and has not returned to favor some thirty years later. When I see a home with mauve and burgundy I immediately think of 80s "hair" bands like Twisted Sister and holy cow this place is dated. In all fairness the mauve and burgundy fad was a heck of a lot better than that 70s avocado and bright orange nonsense!

So in closing think about what you are trying to do. If you are remodeling with the intention of selling or remodeling again a few years, then hitting that latest fad in trendy home decorating is fine. If you are remodeling the home you intend to stay in for awhile stick to the classics and the timeless favorites because timeless is exactly that.

Summer Real Estate Trends

Local trends in the market place show a continued healthy market here in Clark County, WA. July showed a slight dip in sales but new listings stayed a bit flat so that gave us a much needed boost in inventory. It was not a big boost but it helps. With 2.1 months available it is still tight and the market still favors sellers. I am finding that the multiple offer feeding frenzy is occurring less often and only on homes that are really well priced. Agents marketing homes at close to fair value are seeing quick turn around but not the craziness of a month or so ago. Sellers looking to puff up their price are finding some market resistance.

This my friends is what a healthy market looks like. Well priced listings attract multiple offers, properly priced listings go pending in less than a month, and over priced listings dangle in the breeze until the market catches up to the puffed up price. 

Clark County is sitting at a median sales price of just over 300,000 and growth is showing about 0.4-0.5% monthly gains, which is a healthy annualized number of about 5-6%. Anything higher is not sustainable.

Builders continue to produce new homes, The modern trend of big house on small lot continues as land values and increased state and local regulations push costs higher on land development. Homes in the sub-median price ranges will continue to see robust activity and multiple offers. Above median still seems to be a healthy market with a leaning towards seller favor between the median and $450,000, swinging to neutral from $450k to $750k and still favoring buyers, although only slightly, once above $750k for the most part.

This is a solid and sustainable market and if it continues we will see slight fluctuations between slowing to 2-3% growth then perking up to say 7-10% briefly. All of this based on local and national economic trends.

It's a good market my friends.

Market Report

Spring is coming to a close and the hot summer rapidly approaches. The temperatures are not the only thing heating up. The final numbers for the month of May, showed more than 700 residential units sold. With inventory tight, buyers are engaged in a battle to get to first position.

The Clark County median is sitting right at $300k up about 8% over last May according to data collected by the RMLS. Some are surprised that it is not double digit growth year over year, but that is just a sign that the market's ability to pay is becoming tapped out. With the median household income in Clark County sitting at roughly $60k annually, that means the median purchasing power is limited to about $1800 per month. $1800 a month equates to about a $275,000 purchase price. These are rough numbers and there are many variables, but in general when the median price of a house exceeds the median purchasing power, the prices tend to level out or stabilize a bit.

Demand is still high enough to offer a rapid sales opportunity for sellers, but the market has begun to show real reluctance to look at overpriced listings. Last year and up until about six months ago overpriced listings were still being courted as buyers were willing and able to pay. Now the ceiling for our market has been breached and that will cause a stabilization in the upward pricing particularly under $350k. Sellers will have to bring a reasonable price to market if they want a fast sale and the bidding up is slowing a bit as buyers are leery of low appraisals.

The middle and top of the market may continue to see some growth as the bottom has been feeding a healthy volume of buyers that took profits on a smaller house and are looking to move up. Even though sales are robust and pricing is softening a little bit, the entry level market remains ultra tight at least partly due to the reality that many of the sellers in the middle and upper part of the market are retiring Baby Boomers looking for the classic downsize. These Boomers are competing with the entry level buyers and they are often coming with big down payments of even all cash offers. This makes it challenging for first time buyers.

I hear a great deal of chatter among the community centered around a fear of another bubble. Although the prices have been accelerating rapidly since 2012, the rapid growth is not as robust as it was in the middle 2000's when 15-18% year over year gains were happening. Furthermore, the shady and dangerous lending activities that were going on prior to 2009's crash are no longer happening either. The real estate market does ebb and flow economically like many other commodities, and there is no short term guarantee that prices will continue to appreciate. There is however reason to believe that an event anywhere near the magnitude of the last market correction, is highly unlikely.

I believe that market conditions locally will continue to show modest appreciation gains but likely less than 5% growth in values over the next 12 months. Trends are what they are however, significant positive or negative economic shifts can knock these types of predictions over in a heartbeat. For buyers worried about buying at the top of the market, I say this: rents are high and many people can still buy the same house they are currently renting for less per month. Unless one is a mobile person that moves allot, buying still makes way more sense than renting in this market.

For sellers wondering what their home is really worth right now, contact your trusted real estate pro and have him or her conduct a Comparative Market Analysis. If you don't have a local pro, fee free to reach out to me and I can give you a detailed analysis at no cost to you.

Big on Small or Small on Big?

With the recent building boom this article still resonates. Originally posted here August 29th, 2014

The trends in home building for middle income buyers has been larger homes on small lots. Builders have been stuffing 2200 square foot homes onto 4000 square foot lots. There is a wow factor when a prospective buyer walks into a brand new house with 2200 square feet of space and all the nice modern features.

The trade-off has been in the "real estate" portion of the deal. These gorgeous big houses had nearly no yard and a tiny so called two car garage. For the very same money a buyer could look at a 20 year old home with 1800 square feet sitting on a large 10,000 square foot lot. Sure, that house was a more dated design, but often the seller had done updates to improve the feel of the home.

So buyers that find themselves in the local market with a $250,000-$300,000 budget will face the same dilemma. 'new on small' or 'old on big'? That trend of new on small even pushed it's way into the bottom of the upper income homes. There are a great many 3500 square foot homes stuffed onto 5000 foot lots here in Clark County as well. Some of these are top quality builders cramming luxury homes onto postage stamp lots up on Camas' Prune Hill.

Buyers should consider that land is valuable. It is a major part of the real estate equation. Having a large, safe yard for children or grandchildren to play in can be most valuable. Summer parties in a real backyard are hard to beat as well. Buyers are well advised to look at a range of homes from new on small to old on big before making that final decision. There are strong merits to both concepts. Personally I am at a point in my life where a big house on a small lot would be just dandy! One should just make sure they are choosing the property that will serve them best rather then the property that offers more bling.

Real Estate Trends Well in Clark County

I have been perusing through the copious sums of real estate data provided by our local MLS. Overall the market trends are looking solid. I took a look at the last three months, August through October in Clark County. The median price for a home sold excluding bank owned and short sales, was $254,000. This 3 month period produced 1875 sales. This compares to 1475 sales with a median price of $240,000 over the same period last year.

I took short sales and bank owned out because these properties can skew the figures. Often bank owned properties are trashed and snatched up by investors with all cash at prices well below market for a move-in ready home. Short sales dramatically skew the marketing time because they take months to complete. Both bank owned and short sale categories are decidedly shrinking as a percentage of the market.

Investors are finding it increasingly difficult to find homes they can either fix up and resell or purchase for rental. That market is very tight right now.

The data shows a few hidden gems. First the average price is 290k which is roughly 15% higher than the median. This indicates that the activity below the median is closer to the median, clumped up tight against the middle. The activity above the median stretches well beyond the middle into the upper end. Median means half cost more, half cost less. The idea is to eliminate skewed results from a large number of sales at the extremes. But the average is still important because it shows us where the market trend is; high, low or middle. If the average is higher than the median, like it is here; the activity in the half of sales above the median tended to be well above and/or the sales under the median were close to the median. If the average is lower than the median (this is unusual in large markets), that indicates that sales below the median often fell well below and the homes in the top half were likely clumped close to the median. When the median and average are very close it means that the bulk of sales were very clustered around the median with few extremes or there was a very even disbursement across the full range of values.

The trend now, is in the high side of the median. The bottom of the market has become so tight that most of those properties are selling in the $200-250k range. The top of the median is showing broad activity well above $500,000. This is driving the average up. This can mean many things economically. Perhaps this is indicating a vote of confidence in the local economy or real estate market as people return to upgrading their property. It could also indicate an urgency at the top of the market as loan rates remain low but prices are heading north.

Sellers with homes that are above median have an opportunity to list and get solid activity and a good offer. There is strong movement towards the middle upper price range and that was absent just a couple of years ago. 2015 has strong potential to be a great year in real estate.

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.

The Sales Data Looks Healthy

I just spent the better part of this morning analyzing recent data from our local Multiple Listing Service and decided to run my 13 month analysis. One thing we often get in real estate is snippets of data year over year. This can be a good quick check to see which way the market has moved over a year, but lacks the insight provided by a monthly look at the trend over that whole period.

Many people like to see great leaps in price or sales but that can be unhealthy. Of course it is not as unhealthy as a depreciating market or precipitous drop in sales. But a rapid rise can lead to a premature peak and result in an uncomfortable drop in the market. Think about the four years of 2004 to 2007.

Data acquired from Regional Multiple Listing Service for Clark County, WA 
9-2012 through 9-2013 single family homes, excluding condos

Generally a modest and smooth appreciation in home values along with solid relatively flat seasonally adjusted sales is very healthy. Guess what? That is exactly what we have right now. The 50 year average appreciation for homes runs right around six and a half percent per year with a little more in up markets to offset the down markets. So an 8-10% annual appreciation over a decade is pretty healthy.

The median price for Clark County, WA is up from 197k in September 2012 to 237k as of September 2013. That represents a non-seasonally adjusted jump of around 20% but the curve will flatten again as we approach the winter. That sharp increase is a much driven by a movement from entry level buyers to mid level buyers as it is about actual appreciation. What I mean is that the inventory for the 125k-150k move in ready home dried up. Most of those entry level buyers are still making the same income they made a few years ago and they are priced out of the market. However those who sold their entry level homes a year ago made the move up in the last year driving the move up market. That moved the median price up disproportionately to actual appreciation.

I believe we will see a 30 month growth in median price starting from June of last year and ending on January 2015 at close to 30% which will average to around 10% annually. This is would be healthy. The current flat economy will keep things well regulated and without some improvement could lead to a fade in this valuation bump we had recently. The first spurt of growth is also often bigger as fence sitters jump into the market. If the market growth slows to a more modest 8-10% that is not a bad sign. On the contrary, it could lead to a steady long term rise in prices that is sustainable over a decade or more.

All that said, the real estate market is affected by many variables in the economy. Interest rates are a strong driver of real estate sales and they have been in the basement for several years. They could be on the rise as the federal government backs off their support of mortgage securities.  Even if rates continue their upward march toward normalcy, the market can still enjoy some growth. The fed will most likely continue their support of rate suppression until the economy is on solid footing. A growing and healthy economy will produce more qualified home buyers. We will lose some entry level buyers to higher rates but gain some in economic upward mobility as things shape up on the job front.

Inventory remains tight but there could be a pent up supply waiting to come on the market. Many people have been sitting on those homes they bought in the boom of '04-'08. They bought at or near the top of the market and have been unable to sell since the crash because they owe more than the market will pay. That is beginning to change as the prices move upward. Many of those people will soon be in a position to sell and many may exercise that option to take advantage of these still relatively low interest rates. Furthermore it has been reported that many banks are strategically holding on to REO inventory which adds to that potential inventory increase over the next few years. An increase in inventory will flatten out the sharp appreciation, but the availability of willing buyers should keep things modestly improving. Overall the real estate market is in position to enjoy a sustained gentle growth pattern that is healthy and beneficial to a recovering economy.

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.

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.