Winter 2010/2011

 

Happy New Year!

We’re getting the year started off right with headlines like “Mortgage Rates Start Year Lower,”  “Hot December for King County Home Sales,” and “Jobless Rate Falls.”  On January 7th, the media reported that Federal Reserve Bank Chair Ben Bernanke stated to Congress that he believes we’ll see “moderately stronger recovery” in 2011, with consumer spending and business investments on the rise.  Great news!

It certainly is.  We must also temper the optimism with prudence as we realize that the recovery will take time and continued effort on everyone’s part.  Unemployment may be dropping, but that’s of little comfort to the millions who are still without jobs.  The housing market is regaining its footing and stability, but it will take time.

Thankfully, enough consumer confidence has returned for builders to start working on new housing starts—we expect the 2011 level of new construction to be significantly more than the 2009 and 2010 levels.  The major banks continue to report high levels of mortgage refinance applications (rates are still excellent) and added that they’ve seen a significant increase in new mortgage applications as well.  All are good signs, let’s keep the momentum going.

 

-Rich      

 

2010 Real Estate Year in Review

 

2007 was the year that local real estate prices peaked, and also the year that the real estate market faltered nationwide and we began a multi-year price adjustment.  The average price for a single-family home in King county hovered above $400,000 at the peak, and reached a post-2007 low of $359,950.

While there have been stressful times for owners and industry professionals, we will end up closing on about 16,000 homes in King County for 2010, roughly the same as 2008 and 2009. 

Zillow.com calculates that between Oct 2009 and Oct 2010, greater Seattle Metro area (which includes parts of Pierce and Snohomish county) home prices fell 11.6%.  The decline in prices hasn’t been equally distributed: popular neighborhoods in Seattle might have increased in price a bit over the year, whereas harder-hit areas with higher rates of distressed properties saw bigger price drops.

Many banks are finally getting serious and organized about getting their holdings sold off or helping homeowners stay in their homes, which are both necessary for housing stability.  Streamlined distressed property sales will help, too.

 

“I May Sell Low, But Then I Can Buy Even Lower”

One of the most common questions that potential sellers are asking right now is whether or not they should move.   If they bought their house within the last few years, they may have to take a loss when they sell.  However, prices for the pretty house across town or down the street that is bigger/newer/nicer/more charming has never been more affordable, increasing the desire to relocate.

Regardless of why, the fundamental concern is the same:  selling now may mean taking some sort of loss. 

That may well be correct, but remember that  most other sellers are also in that position.  According to research firm First American Corelogic, more than 25% of American home owners owe more than their house is worth.  This figure doesn’t include all of the people whose houses are worth less now than when they bought them (I wouldn’t be surprised if this nearly doubles the 25% rate).

Let’s look at the bigger picture. You may have to sell for just a small gain or even a small loss, but you will make the gain on the purchase, especially so if you’re moving up in pricing. Within a similar geographic area, houses may have, for example, lost an average of 15% of their value since 2008.  A house that was worth $700,000 would have lost more of its value in real dollars than a $400,000 house (assuming that neither is junky or distressed). 

Remember that unlike the stock market or commodities, real estate is property-specific.  Every seller and buyer has different motivations and a different back-story.  Consider the real estate transactions as a whole and you will realize that there is a big potential for gain in this market.

 

“Shadow Inventory:” What is it? 

Different folks define it in different ways.  It can include foreclosed homes, homes that are significantly late on their mortgages, properties that are in the process of being foreclosed on, and bank-owned properties that have yet to be listed or sold.  Depending on what “shadow inventory” encompasses, the total number of these homes have been estimated to number in the millions.  In King County, the concentration of distressed properties is still in the south county cities, but the number of distressed properties in the core markets of Seattle and Bellevue have grown (albeit slowly by comparison).  Several experts on the local housing market, including experts at the Washington State University Real Estate research center, believe that homeownership rates should rebound within the next few quarters and that there are enough buyers and investors to help stabilize the market. 

An article in the Seattle Times on 12/31 entitled “Apartment projects are booming despite cool real-estate market” outlines what many investors already know:  it may be a great time to be a landlord.  Housing starts declined to the lowest levels in decades and the inability of many buyers to become homeowners means that demand for rental housing has increased.  Even what I once thought to be overly expensive rentals that would be difficult to fill (like Circa in Green Lake, Joule in Capitol Hill, Equinox in Eastlake and Rollins Street in South Lake Union) have been filling their units.  On the eastside, failed condo sales of luxury units in downtown Bellevue, such as in the Bravern, have witnessed success in filling their units with tenants as well. 

 

 

 

Built Green

Environmentally-friendly construction makes use of recycled, renewable and low-impact materials.  It also has a heavy focus on efficiency (e.g. energy-efficient windows, water-saving appliances…).  Many Built Green homes also feature materials that have lower harmful emissions.  Although Built Green has been a popular concept in local construction for years, what many don’t know is that modern building codes have required builders to be more green anyway.  Extra insulation, double-pane windows, and lead-free paint are just some of the standard things we see in new construction.  In surveys, buyers rank eco-friendly homes as being a perk.  Sales figures, however, show that buyers aren’t willing to pay significantly more for it.  I think builders have gotten smart by emphasizing things that provide value for everyone.

 

 

 

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