The New Normal

I’m through complaining about the lack of inventory in the local real estate market. The number of houses for sale in our area is at its lowest level in more than 20 years and that’s just the way it’s going to be for a while. And while I can’t easily decipher Janet Yellen’s musings I think the same can probably be said for the low interest rates and for our strong local economy. Say hello to the new normal!

Much like the weather around here, the “spring” real estate market seems to be heating up a bit early. Here are a few interesting stats that illustrate what’s going on.

With that backdrop here are some things to consider if you are thinking about buying or selling in this seller’s market.

FOR SELLERS
• Even in this seller’s market, if you shoot for the moon and overprice your home it will sit on the market. The market remains very efficient (and brutally honest). By contrast, it is virtually impossible to under-price your home in this market. Go a little low and if your home is worth more buyers will bid it up to its rightful level. Get a professional (non-Zillow) price opinion from someone who is not just telling you what you want to hear and don’t get greedy.
• Since you will likely be able to dictate some of the terms of your sale, make sure your agent understands the deal terms other than price that are most important to you (i.e. closing date, pre-inspections, financing terms, remaining in the house after closing, etc.). Properly communicating your preferences to buyers up front can help during negotiations and really streamline the process.
• As you get ready to sell don’t spend “dumb” money on projects that won’t increase the value of your home in the eyes most buyers. The goal is to do the things that will make your home appeal to the broadest possible buyer pool. A quick conversation about what to do, what not to do and why is always worth the time. Call me.

BUYERS
• Get someone good on your side. In a hot market like ours you need to have an agent working for you who can give you that “unfair advantage”. A good agent’s intimate market knowledge and a strong personal and professional network can give you a first mover advantage, strengthen your negotiating position and ensure that your offer stands above the crowd. (Despite the urban myths, few ever “outfox” the market and in times like these the number is actually zero!)
• Make sure your financial house is in order. Unless you are an all-cash buyer with the full amount of your purchase sitting in the bank, make sure you consult with a mortgage professional to figure out all your options and get pre-approved for a loan. A good mortgage person will propose options you had not considered and when the time comes will help make your offer as strong as it can be.

So that’s the view from here. Let me know how I can help.

A few new numbers…

The latest numbers from Case-Shiller confirm that real estate prices are still on the rise here in the Seattle market. They are rising at a slower (and hopefully more sustainable) pace than they did in 2013, which is probably good news for all of us. See http://tiny.cc/c934sx for the details and an interactive graph by market.

Of note is the fact that in some neighborhoods in and around Seattle prices are at or near the peak levels from 2007! 2015 is also off to a fast start…

State of the Union

Here’s a quick look at some of the main drivers of the local market as we head toward the end of the year.

  • Interest rates remain near all-time lows. Rates on 30-year fixed rate mortgages are at around 4% and for shorter term loans, ARMs and even Jumbos the rates go down from there! These rates drive “affordability” and should keep buyers engaged.
  • The population of the Puget Sound region and more specifically the Seattle metro area continues to grow rapidly. The strong and diverse local economy is adding good jobs and people are drawn to the region’s communities, schools and lifestyle. We live in one of the fastest growing major metro areas in the country.
  • Residential rents continue to increase throughout the region, tilting the buy vs. rent calculation toward buying for many young and first-time buyers.
  • The builders are back in force and are out in the market competing to buy land for new construction projects. Cranes once again fill our skylines, and both new construction projects and remodels appear to be on every corner in residential neighborhoods from West Seattle to Kirkland.
  • The inventory of available homes for sale remains at or near its all-time low. In September the eastside averaged a 2-month supply of inventory and in Seattle the number was 1.4 months. A market is considered “balanced” between buyers and sellers if it maintains between 4 and 6 months of inventory, so we’ve got a long way to go.

So, add ’em up. Increasing demand from relocating employees, builders and foreign investors plus cheap money, rising rents and low inventory all point to a continued strong market and increasing home prices – at least in our area’s most desirable neighborhoods – well into next year.

As things slow down for the holidays, it’s a great time to take stock of your real estate situation and to evaluate possible action plans for the coming year. Let me know if you (or someone you know) would like more specific market data or if you just want to make sure you have all the possible options on the table for moving forward.

Back at it!

Every year at this time, after a nice long summer, we head back to work, school and fantasy football with renewed enthusiasm and a little extra pep in our step. Whether we’re simply turning the page on another year or starting a completely new chapter in our life it’s a great time of year to take stock of where we are and consider future plans.

If future plans might include a move a quick conversation about the state of the market, the value of your current home, how to maximize its value, and to get all your possible options on the table is always worth the time. Let me know if I can help.

In the meantime, below is “Neighborhood Snapshot” of Kirkland. I’m going to add these profiles of recent sales to the newsletter from time to time to give an idea of the state of the market in different areas. Kirkland is an interesting study. Three distinct neighborhoods, a great downtown scene, beautiful views, lake access and a variety of housing options from new construction homes to building lots to nice condos and townhomes make Kirkland an attractive option for lots of folks.

Enjoy the stats below and let me know if there’s a neighborhood you would like to see profiled in the future.

Next Moves…

Reaction to my last post about there being plenty of quality properties to be had even in this “low inventory” market (see http://blog.ripwarendorf.com/strategery/) got me thinking and talking about how folks can best take advantage of the situation. Here are some follow up thoughts on removing obstacles and moving ahead.

The most common hurdle that comes up when folks start considering a move goes something like this: “I want to use the proceeds from the sale of my current home to purchase the next one, but don’t feel comfortable selling first for fear of not being able to find what I’m looking for in this tight market.” No one wants to be left in the lurch or be forced to settle because they have sold their house and have to move.

Several recent conversations with mortgage lenders have revealed creative solutions to this issue. For example, according to John DesCamp, a friend at Cobalt Mortgage, depending on the equity you have in your current home it can be easy to finance your purchase without selling first. You can access the funds using a bridge loan and then refinance that loan with a conventional mortgage after you sell your house. Rates on these loans are competitive and in some cases they can also enable you to look like a cash buyer (i.e. no financing contingency) when you make your offer. I know plenty of smart people in the mortgage business who can present you with your options, probably including solutions you had not considered. Let me know if you would like an introduction.

The next step is to get a plan in place that will allow you to quickly and efficiently market your current home when the time is right. (That’s where I come in!) Agreeing on the pieces of this plan now, and doing the needed prep work to get your house ready to sell will give you the best shot at a smooth, inexpensive transition when the time comes. Getting the ball rolling on these two fronts will help you avoid chaos down the road, and may even uncover options you have not considered.

Operators are standing by…

Strategery…

Several people have recently told me that they are considering selling their homes, but haven’t pulled the trigger yet for fear of not being able to find their next place in this wild market. Fear not! With the right approach It is still possible to get the property you want without the stress of multiple offers and bidding wars.

Believe it or not, even in today’s tight market, there are currently 79 single family homes and 43 condos for sale in West Bellevue that have been on the market for more than 30 days. Many of these properties are still available due to a single flaw: their price. After a month or so on the market listings can fade into the background and not get much love from buyers or their agents. Our market is very efficient and it speaks loud and clear, and while many sellers are reluctant to admit it, they know they will eventually have to adjust the price of their property if they are serious about attracting a buyer. Approaching these sellers with a solid but realistic offer can often result in a good deal for all involved.

Here’s a small sample of the 30-day+ inventory currently available in West Bellevue.

*  Two beautiful 4,200+ square foot homes in Clyde Hill listed for $2.1M and $2.2M

*  A 2,100 square foot condo in downtown Kirkland with lake views and a private roof deck listed for $975,000

*  A nearly 5,000 square foot “fixer” on Yarrow Point listed for $1.7M

*  Two Lake Sammamish waterfront lots (or possible remodels) each for under $1M

*  Multiple two-bedroom condos in downtown Bellevue with lake and city views listed for $700,000 and up

There are plenty more where these came from and with the right timing and approach someone will eventually buy all of them for about what the market says they are worth. Maybe that’s you! Let me know if you want me to keep my eyes peeled for something specific.

Operators are standing by…

Here Comes Summer…

The local real estate market remains strong and active as we head into summer. Single family home prices in the Seattle metro area have seen a nice run up over the past couple years and are approaching pre-crash levels in some areas. Below is a look at the Case-Shiller price index for the Seattle metro as a whole. It’s a pretty clear picture of the boom, the bust and the recovery to date.

Sellers looking to take some money off the table after the gains of the past couple years have added a few listings to our market recently, but the market is still decidedly tilted toward the sellers as inventory remains near historic lows.

I recently discovered an interesting stat on a local real estate blog (see www.SeattleBubble.com). It is a measure of “stale listings” which the blog’s publisher calculates by tallying total listings, new listings and pending sales. This allows him to estimate the number of listings that are carried over from one month to the next and thus deemed “stale”. As you can see from the chart below, the number of stale listings has declined every month this year and is currently near zero.

Source: SeattleBubble.com blog June 2014

Since only price can cause a home to sit on the market these days, I don’t see this measure shooting up like it did last summer. Sellers who price their properties correctly are still seeing multiple offer scenarios that push their homes to the highest price that the market will bear. Those who decide to shoot for the moon on price get rapid, market-driven reality checks and many are readjusting for quick sales.

If you’re curious, I’d be happy to give you an honest assessment of what your home is worth in today’s market. I might even surprise you!

Playing with Matches…

Heading into the 2nd quarter of 2014 the song remains much the same on the local real estate front. Prices are rising (although more slowly than last year) and inventory remains at historically (and painfully) low levels. As a result, the number of transactions is down a bit from a year ago. Here’s a snapshot of March activity.

Interestingly, the local marketplace remains very efficient. While the low inventory and rising prices give the advantage to the sellers, properties priced too aggressively still sit unsold. Last year’s dual fears of rapidly rising prices and the potential of sudden interest rate spikes seem to have abated, making buyers a bit more discerning.

This kind of market often puts me in the role of a discreet matchmaker; working behind the scenes to find properties based on specific buyer needs and making the introductions that bring together buyers and sellers who might not otherwise meet. In the past month alone, I’ve toured beaver dams in Monroe, had a dog make a deposit in a closet during a showing at one of my listings (They bought the house!), and become a low level expert on equestrian properties. There’s probably an HGTV meets Animal Planet reality show here somewhere, but at the end of the day the matchmaking is putting deals together.

If your dream property is somehow unique or your selling situation is a bit different let me know. You might be surprised what a good matchmaker can do!

Food For Thought…

Here we are again. It’s the time of year for predictions on everything from the midterm elections to the over/under on this year’s Kardashian babies. Economists, pundits and assorted gurus are forecasting the year in real estate, and while I don’t qualify for any of those titles, I thought I would take a quick look at the year behind us and the one to come in our local real estate market. Here goes…

Our vibrant local/regional economy will continue to grow in 2014 lead by tech companies like Amazon and Google which remain on hiring sprees. With the Boeing machinists coming to their senses and barring dramatic cuts under the next Microsoft administration, the region’s underlying economy should continue to attract new residents to the area. All in, we should see another year of increasing home prices, but probably in a lower and more sustainable range than the 15%+ increases that many neighborhoods saw in 2013.

One sure sign of strength is our area’s hot rental housing market. Rents rose faster in Seattle last year than just about anywhere else in the country. While boosting the economy by putting the cranes and bulldozers to work on new apartment buildings, rising rents also swing the buy vs. rent decision in favor of buying. This will further increase demand for single family homes and condos.

On the flip side, buyers will find it more expensive and more difficult to borrow money this year, as interest rates continue to climb and a host of new regulations on financial institutions kick in. While still historically low (see chart below) rates for 30 year fixed mortgages are already about one point higher than they were a year ago (+/- 4.5%) and rates will undoubtedly continue to climb this year. The rule of thumb is that a 1% rise in interest rates erodes buying power by 10%, so these rate increases have real consequences.

On the supply side of the equation we’re still looking for relief from the ongoing inventory shortage. The supply of single family homes for sale remains at historic lows (see chart below). We’ve seen some relief as rising prices bring previously “under water” sellers off the sidelines, but investors, who are mainly cash buyers, continue to find our area attractive and are snapping up inventory. About 4 months of inventory is considered to be a market balanced between buyers and sellers. On the Eastside we finished 2013 with less than 2 months so don’t look for the seller’s market to end too soon.

There’s my food for thought. Let me know if you would like further information on any of this or a more specific look at your neighborhood or property. Thanks to everyone who referred friends, family or colleagues my way last year. It is gratifying that you have that confidence in me and as referrals are the lifeblood of our business it is much appreciated.

Here’s to a Great 2014!

The Road Ahead…

The year is winding down and while this may not be the most active time of year for buying and selling real estate, it’s the conversations taking place right now that will lead to transactions in January, February and March of next year. It’s a good time to take stock of your situation, consider your options and to start to pull together a plan that moves you toward your goals. Here are a few thoughts to help kick start the process.
First, look down the road a bit and think about your wish list. If you’re considering a move, list the things you NEED to have in a new home. Then put together a similar list of what you would LIKE to have. Consider the neighborhood, the type and size of home/lot, and your appetite for taking on updating or remodeling projects. Also give some thought to your timeline. It’s amazing how thinking things through and building these lists can kick start the process.
Next, consider ALL your available options. (Hint: This is where sitting down with someone in the business can help, by bringing options to the table that you may not have considered.) There may be a neighborhood that is not on your radar, or a specific type of home that can be easily modified to fit your needs. There could also be specific properties coming on the market where being flexible on timing could bring a unique deal together. It’s also important at this stage of the process to meet with a financial expert who can help you choose between various cash/loan scenarios, get you prequalified for a loan, explain the possible tax implications of your move, etc.
Finally, with the wish list complete and the potential options on the table, develop a strategy to get you to the goal within your timeframe. If you are selling a home, make sure you understand what the property is REALLY worth in today’s market. I can help with that (See the recurring theme here?) and also help you define the tasks that need to be completed before putting your house on the market.
Now comes the FUN part. Getting out and looking at some potential neighborhoods and homes will confirm that you are headed in the right direction and that your plan is achieveable. The plan may take a few unexpected turns along the way, but you will get there. Hopefully this will help get the creative juices flowing. Let me know how I can help.