Archive for May, 2009

Each week the numbers come out indicating how much inventory there is in each of the multiple listing service areas of Seattle and surrounding King County.  Frequent readers of my blog should already be aware of the term inventory but for the newbies here is a refresher.  Inventory is the relationship between how many houses are on the market and how fast they are selling.  It is the information we use to indicate if we are in a buyer’s or a seller’s market.  Generally the more houses and the slower they are selling the more it favors buyer’s.  When there are fewer houses selling more quickly, it favors sellers.

The numbers below are expressed in months of inventory.  Numbers below 3 are generally considered a seller’s market.   Numbers between 3-6 indicate a balanced market.  Numbers over 6 indicate a buyer’s market.

Each column represents one of the past 7 weeks with the average at the end.

As has been true for some time, NE and NW Seattle represent the hottest markets right now and in fact are in the range that would consider them seller’s markets.  SoDo and Georgetown though have made a strong charge and are close behind and also seller’s markets.  Even the western end of Shoreline including Richmond Beach has been improving. 

Overall there are no markets that still appear to be buyer’s markets.  All remaining neighborhoods are balanced.

Ok so those are the numbers but being in the trenches each day I can offer a little more insight.  The facts are the the cheaper the homes the faster they are moving.  The recovery is transitioning from just plain bottom feeding to buyer’s picking at appropriately priced inventory.  They are still pretty cautious though.  Much of the really old, really cheap houses have been bought up and what is left is getting absorbed at a more moderate pace.  The higher the price point in general the slower the sale.

Take a look around your neighborhood.  You are likely to see a lot more sold signs and a lot fewer for sale signs overall.  Listings are way down compared to last year.  This is good news.  Seller’s are aware of the market and choosing to stay in their homes for a while longer.

Buyers continue to be very picky though.  They are still trying hard to negotiate better deals on list price and closing costs all the way around.

My prediction is for a stable to improving summer.  No fireworks but a healthy absorption of moderate amounts of inventory.  I do expect to see a flurry of activity in the fall when people jump to take advantage of first time home buyer tax incentives prior to their scheduled expiration on November 30th. 

Give me a call if you need help.  I’d love to work with you.

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Rob Graham, Accredited Buyers Representative

Windermere Real Estate

206-321-6349

robgraham@windermere.com

Popularity: 3% [?]

Those who do not learn from history are doomed to repeat it. 

You’ll forgive the melodrama I hope, but you get the point.  We are in the worst housing crisis Seattle has seen in quite a few decades.  If you are reading this I can only assume you are at least considering purchasing a home in the near future, so the question is a fair one.  How do YOU avoid finding yourself in this position in the future?

Human nature is what it is and it is inevitable that there will be ups and downs in the economy and housing market in the future.  But don’t concern yourself with the overall market as much.  Worry about how you can protect yourself and your family from foreclosure, mortgage fraud, and economic collapse in the future.

1.  Never utilize all the equity in your home.   Many people in the past several years have repeatedly taken out home equity lines or refinanced their homes to take vacations, buy cars or pay off credit cards.  If you need to do this, you should be seriously evaluating your financial situation.  The equity in your home is like a safety net.  It is the reason why some people are sleeping well these days and others are not.  Leave as much equity as you can in your home.  Never let it drop below 15% of the value of your home. 

2.  Don’t put anything on a credit card you can’t pay off in the next billing cycle.  We in America have gotten too used to looking at credit cards as free money.  “I’ll just put it on the card.”  has become common place.  The average American has over $8,000 in credit card debt.  This crisis isn’t just about housing.  It is about using money irresponsibly, by institutions and individuals.  Keep those credit cards open because they are good for your credit rating, but don’t overuse them.  Pay them off each month.

3.  Don’t fall for a 3/1 ARM rate.  I hate these things.  I really thing the mortgage industry should outlaw them.  5/1 ARM’s aren’t a lot better but the extra two years is helpful.  I am fine with 7/1 ARM’s.  If I were shopping for a mortgage today I would get a good old fashioned boring conventional 30 year fixed mortgage.  If I didn’t have much of a down payment, I would settle for an FHA loan.  No ARM’s, No balloons, no using some guy who got my attention by screaming some ridiculous rate over the radio or TV, and especially I would never use anyone who doesn’t have a real office where I can go and sit down with them eye ball to eyeball and talk about the terms of my loan. 

4.  Don’t over buy.  In years gone by I have seen many clients stretch themselves to the limit to try to get the biggest house humanly possible.  Does a family of four really need 3500 square feet of living space.  When did we become so obsessed with appearances.  It isn’t a competition.  How about purchasing a reasonable home and putting a decent amount of money away in savings each month. 

5.  Save 10% of what you make.  Grandma was right.  Putting money away for a rainy day is a great idea.  It provides comfort and security.  Save up for a rainy day or plan on being rained on.  Just ask those that are now getting wet. 

6.  Don’t put all your money in the stock market.  The stock market is not a cash machine.  Everything is not guaranteed to go up.  Many people have lost a great deal of money this past few months in the stock market.  Stocks aren’t savings.  They are a gamble.  It is great to max out your contribution to your 401K if your employer has a matching policy, but other then that your “savings” should be in an interest bearing account that is not subject to any kind of market conditions.

7.  Continue to live below your means.  All of the things Americans are doing right now, ie. brown bagging it, using public transportation, cutting down on unnecessary purchases and travel, eating out less, etc. are all great ways to maximize your dollars.  But you can’t do them only in a recession.  the smart money does these things all the time.  Ok reward yourself from time to time, when the money is there, but don’t live like that.  Smarter use of your money is worth a lot more in piece of mind.

It aint sexy, but you know what is sexy?  Sleeping through the night when your neighbors are being foreclosed on. 

So there you have it.  My 7 point plan for keeping yourself out of hot water the next time the economy goes south. 

In the mean time, wanna buy a house?  Give me a call.  I’d love to help.

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Rob Graham, Accredited Buyer’s Representative

Windermere Real Estate

206-321-6349

robgraham@windermere.com

Popularity: 4% [?]

I was hoping to hold of on writing about this until the details of how this is going to work are official, but I keep getting questions about it, so I thought I would let you know where things stand right now.

The $8,000 tax credit is designed to stimulate home buying for first time home buyers.  First time home buyers typically make up about a quarter to a third of home purchases and represent the segment of home buyers that typically have the least cash to put down on a home.  Because of this the tax credit was introduced to make first time home ownership more affordable for people. 

One of the things that stalled the housing market in recent years is the fact that zero down home loans went away.  Banks were no longer willing to take that risk when they started to see increases in default rates especially among those who used the more risky loan products. 

What Washington State along with many other states are recognizing, is that the more readily available that $8,000 is to first time home buyers, the more it is likely to get used.  Ways to access the credit already include waiting until next year and or having your withholding adjusted this year. 

Now the governor and state senate have agreed that making the tax credit available to help pay for your down payment, is a good idea.  It makes perfect sense.  FHA loans offer the lowest down payment option.  Still you are required to come up with 3.5% of the purchase price to qualify for an FHA loan.  Not many first time home owners can come up with that kind of money.  $8,000 would go a long way to easing that burden. 

As of right now we are not sure how the money will be made available.  The most talked about solution is that banks lending on the home will grant the borrower an additional loan and then  be reimbursed from the government.  The details are still vague, but one thing is clear.  All sides are working hard to make home loans more flexible and affordable for people.  In particular first time home buyers.

Stay tuned.  As the details of this program become clearer, I’ll keep you posed.

Let me know if you need help.  Summer is a great time for home buying.

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Rob Graham, Accredited Buyers Representative

Windermere Real Estate

206-321-6349

robgraham@windermere.com

Popularity: 7% [?]

Here in Seattle we are seeing a lot of the same housing situations that we are seeing around the rest of the country.  A whole new vocabulary has popped up in the media.  I thought I would help clear the air about some of the new confusing terms.   There are some subtle distinctions so lets look at each one separately first:

Pre-Foreclosure – A home that is in Pre-Foreclosure is one where the owner is in default of the loan.  They have missed several payments and the bank has informed them that they are initiating the foreclosure process.  Typically the foreclosure process takes at least 90 days.  It is somewhat expensive for banks to foreclose on a home and often they would prefer to sell the home, even at a loss prior to having to foreclose.

Foreclosure – Foreclosure is the process of the bank taking possession of a home from an owner.  Once the bank has foreclosed, ownership changes from the individual to the bank and the bank can and often does turn around and sell the home. 

REO – REO stands for Real Estate Owned.  It is property that a bank has foreclosed on and now owns.  These are some of those “toxic assets” you hear about in the media.  Banks don’t like owning homes.  They like lending money.  Banks often have an REO office that is in the business of selling these properties.  Often banks are willing to part with them at a bit of a discount to get them off their books but not always.

Short Sale – A short sale is where an owner is forced to sell their home, but will not make enough money from the sale of their home to cover the existing loans on the home.  In order to sell a home this way, the bank needs to give its approval since they are not going to make back the money they loaned on the home.  The owner may be current on the payments, or not.  Short sales can be very complicated and take a long time to complete.  Still, I have worked with buyers who have gotten great bargains on their homes by being open to short sales.

Distressed Home – A distressed home is a home where the owner is at least 30 days late on a payment.  They may face late penalties, but just because a home is distressed does not necessarily mean that they are going to be foreclosed on or that they will need to sell. 

So lets recap.  Lets say you own a home and you fall short of making a payment in a given month, you are now distressed.  If your bank issues you a notice that they are initiating foreclosure on you, you are now in pre-foreclosure.  If the bank follows through (at least 90 days after notice) and takes possession of your home, you have now been foreclosed on and the property is REO. 

Regardless of the involvement of the bank, if at any time due to market changes or any other factor you are forced to sell a home that is no longer worth what the bank (or banks) is/are owed on the house, it is now a short sale. 

In these financial times, we are seeing a lot of homes selling that are in various compromised positions.  Such homes can sometimes be bought at a discount.  They are treacherous waters however.  You want to make sure you have some experience on your side to help you navigate the murky waters.  We are dealing with a lot of money here.  Don’t take any chances.

If you need help, you know where to find me.

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Rob Graham

Windermere Real Estate

206-321-6349

robgraham@Windermere.com

Popularity: 4% [?]

Many of you are already aware of how excited I get each month at this time when the numbers for home sales for the previous month here in Seattle come out.  I was already expecting big things from April, but they exceeded even my expectations. 

Here are the highlights:

• April saw more pending home sales then any month going back to July of 2007.
• Inventory dropped from 5.7 months of inventory in March to 3.9 in April. 
• Median price of homes sold in April remained flat at $389,000.
• The average amount of time it is taking homes to sell dropped slightly from 125 days to 111.

The pending numbers bear a little more explanation.  The pending sales are those that came under contract in a given month and are expected to close in the near future.  the jump in pending sales was pretty dramatic from 383 in March to 538 in April.  That is a 40% jump in one month. 

Inventory is the relationship between how many homes are for sale and how fast they are selling.  for example, April’s number of 3.9 months, means that at the current rate all the homes currently for sale would be bought up in 3.9 months.  Compare that to the previous month of 5.7.  

Median home sale price has flattened out as well.  This is another good sigh of recovery.  The first homes to be bought in a recovery are the cheaper homes.   Buyers are only willing to buy those homes that are priced at a discount.  The leveling off of prices suggests that a lot of the bottom feeding has resulted in much of that inventory being taken off the market.  Once this phase of the recovery passes, buyers will begin to nibble at the higher priced inventory that is a better reflection of true fair market value. 

ll this is good news for banks and homeowners.  As home values rise and the rate of short sales slow, banks balance sheets will continue to look healthier.  Also, homeowners will feel a sense of relief that the value of their investments is again on the rise.  As this happens banks will feel better about lending money and homeowners will feel more apt to spend money.  Combine those two things and the grip of the recession will ease. 

Keep in mind that this isn’t an overnight phenomenon. It will be months before we can claim the end of the recession.  It is also true that for housing, Seattle is emerging from the funk much earlier then many other parts of the country.  Heck, Seattle is emerging much quicker then Bellevue. 

Still all this is great news for the housing industry and the overall economy.   If the trend continues even gradually, we are in good shape for improved health  as we move forward.

Give me a call if you need help.  I am always looking for great clients like you.

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Rob Graham, Accredited Buyers Representative

Windermere Real Estate

206-321-63249

robgraham@windermere.com

Popularity: 7% [?]