" you may be better off selling in 2008. Maybe that will be a fraction less than you could have gotten had you sold 12 months ago. But it very well could be 20% more than you will eventually sell for, if you can't wait until a very long time from now. "
I'd say that was pretty "spot on" given King County is almost exactly 20% down from peak pricing, with much of that, more than half, happening in the 4th quarter of 2008. Just wanted to check what I was thinking last year at this time, before doing my year end stats and advices.
For me, blogging is part of my work and not a sideline. Every professional needs to take stock of where the market is during the last week of December, in order to be able to spot and analyze changes in the marketplace as the new year unfolds. So it may be Christmas Day, but for me it's a day of accounting for where the Seattle and Eastside Real Estate markets are today.
I'll be comparing to the charts below that I did last year on January 6th of 2008.
Dec. 15, 2008 - Rent to Own, Lease to Own, Lease Purchase
I'm going to start this post with this warning:
"In most cases, the accumulated rent is used to lower the purchase price or to reduce closing costs. (Fannie Mae and Freddie Macguidelines generally preclude using rent money toward the down payment, mortgage experts say, because buyers need to prove that they can save on their own and thus qualify for a loan.)" From this article
I was greatly surprised to see my friend, Jonathan Miller's recent quote in this same article:
"The rent-to-own concept represents “a change in mind-set” during these tough economic times, said Jonathan J. Miller, a founder and the president of the Miller Samuel real estate appraisal firm. “The longer this drags out, the more acceptable this option becomes; this is just evolving,” he said."
Back on September 6. 2008 when I first took Lease Purchase out of the closet, and dusted it off as a possible answer to current market woes, we didn't get a chance to fully explore the option in the many, many comments. An argument ensued about Lease Option vs. Lease Purchase.. That debate has a simple answer (even though it took over 200 comments to keep saying the same thing again and again back in September :)
If you are buying it today, but need time to close and are renting it until you close, then it is a Lease Purchase. If you are renting it today, with the option of maybe buying it at some point in the future at a price set today...that is NOT Lease Purchase.
In the last several days I have had 6 out of 10 situations exploring Lease Purchase vs. straight out buying right now. #1 reason as to why was that the buyer owned another house that isn't sold...isn't even on market to be sold. This means they don't have the money from the sale of their current home to use as a downpayment on the home they want to buy.
#1 reason for sellers to be approaching Lease Purchase as a market and sales tool. i.e from yesterday's stats - FOUR YEAR supply of high end homes in Kirkland 98033. Any builder or seller in that upper price range of $1.2M or above (approx 20% of all homes for sale in that zip code) might be looking at foreclosure as the alternative. Many of these homes are new and vacant. Some are already showing the listings as "for sale or for rent" with the rent option being a Lease Purchase optiona and not a straight out rental offering.
Back to the warning in the first paragraph. I would think if a 3rd party collector collected two separate checks each month, one payable to the owner that he can use to pay the mortgage and one payable to the buyer himself that is put into a savings account in the buyer's name, that might meet the Freddie and Fannie Guidelines. Or maybe Freddie and Fannie and whomever is pulling their strings these days will understand the need to accommodate Lease Purchase in some meaningful way at to cash to close.
One would hope with the market in a mess, that they would be willing to work through this option for the sale of the real estate market...the Country and for Presdient-Elect Obama. In any case, a final step in the Lease Purchase contract, besides attorney review, would be LENDER REVIEW where a lender runs the method past the underwriter before the proposed "rent-buyer" takes possession of the property.
To sellers, if there is a 6 month inventory of property for sale of like kind to yours...you may not want to seriously consider going this route unless you are on the brink of getting seriously underwater. But for those with a 2 to 4 year supply of inventory on market in your price range...open all the windows to freshened ideas...and the door to Lease Purchase.
Dec. 14, 2008 - Seattle Townhomes For Sale Under $500,000
This is the 5th in this weeks series of stat posts, but I'm going to skip the graph for townhomes in Seattle.
I used all townhomes North of Downtown. There are 232 for sale, 37 pending and 97 sold in the last 90 days. That gives you a 7.25 month supply.
Take the price to $500,000 or less and you have 169 which is a 5.6 month supply based on pendings (similar to Redmond townhomes) and a 6.5 month supply based on closed in the last 90 days.
I ONLY used townhomes North of Downtown and in the City of Seattle for these stats. I will never understand how people can equate "Townhome in Green Lake" with "Townhome in Beacon Hill"...but they do...yet I don't. I'd rather have a small bedroom a few blocks from Green Lake than a big master bedroom in Beacon Hill for the same price. But that's me.
Off to Rain City Guide to do the Sunday Night Stats Wrap up for the week - "It was the best of times and it was the worst of times".
Only a 5.7 month supply of townhomes in Redmond 98052 - not even a buyer's market
4th in the series "Every Picture Tells a Story, Don't It?" - Redmond 98052 - condos.
For an easy at-a-glance visual of the 'Christmas Balls" in the next 4 posts, think of it this way. The more red you see, vs green and blue, the more of a buyer's market it is. I'll do a wrap up commentary on RCG when I'm finished all of this weeks stats posts, and take the link back to HERE.
The red segments represent Condos For Sale (69) and Townhomes for sale (52). For the key code, you need to read the segments clockwise from the top, or simply refer to the explanation below the graph.
Rather than breaking into 3rds as I did in other markets below, I'm simply separating condos into 1 story condos and townhomes, separately. You don't need to go any further than that in Redmond 98052 condo market, as very, very few townhomes are priced under $350,000 or over $500,000. Townhomes ARE condos in Redmond vs. Seattle, but deserve their own classification here in the stats.
All blue segments represent Pending Sales
All green segments represent Closed in the last 90 days
Remember Remember, the green sold portion is 90 days of sales. The pending is currently pending regardless of when the property went into contract. Let's assume all pendings are not going to close and use 1/3 of the green portion for calculating Absorption Rate of current inventory (red segments)
Condos overall, including townhomes, are at a 6.7 month supply at 121 divided by (54 divided by 3) = 6.7
Townhomes at only 5.7 months 52 divided by (27 divided by 3) - 5.7
Same number of one floor condos sold in the last 90 days, but more for sale, so 7.6 month supply.
Still...for this market...not bad at all.
If you are a seller who needs to sell something...you can't get much better than needing to sell a Redmond Townhome. .
(required disclosure) All Redmond 98052 Condo stats hand compiled by ARDELL and not compiled, published or verified by NWMLS.
Setting this link down here for my own use to keep up with technology outside of the Real Estate Industry. No necessarily appropriate for my blogroll on a Seattle based Real Estate Blog, but we should all keep both eyes open and toward the future.
19 month supply of houses in the over $750,000 price segment
3rd in the series "Every Picture Tells a Story, Don't It?" - Redmond98052 - SFH.
The red segments represent Homes For Sale (254) For the key code, you need to read the segments clockwise from the top, or simply refer to the explanation below the graph.
Breaking it into 3rds, you have about 1/3 in the under $550,000 segment, another third or so in the $550,000 to $750,000 segment and the remaining third in the over $750,000 market.
All blue segments represent Pending Sales
All green segments represent Closed in the last 90 days
Remember the green sold portion is 90 days of sales. The pending is currently pending regardless of when the property went into contract. Let's assume all pendings are not going to close and use 1/3 of the green portion for calculating Absorption Rate of current inventory (red segments)
Under $550,000 = a 7 month supply of homes (89 divided by (38 divided by 3) = 7)
$550,000 to $750,000 = an 8.3 month supply of homes (83 divided by (30 divided by 3) = 8.3)
Over $750,000 = a 19 month supply of homes (82 divided by (13 divided by 3) = 19 )
What you want to think about here is if you think you are going to list your home for sale after the first of the year for $850,000 in Redmond 98052...what are you going to do to reduce the odds of selling in 19 months time? Not many people want it to take almost 2 years to sell their home. But you have 82 people in front of you before you even get into the market and only 4-5 have been selling every month for the last 90 days. That's a long way to go to absorb those 82 homes before counting what comes on market after Jan. 1, 2009.
If you did absorption rate of hmes in 98052 by dividing total for sale of 254 by the total number pending of 43, you would come up with an overall absorption rate of only 5.9 months of supply. If you use 1/3rd of sold in 90 you would have a 9.4 month supply. But I think the picture above is more transparent as to the odds of selling in the near future for individual home owners.
Note: one of the resons the numbers look better (and not realistically so) when you use pendings, is that many pendings are sitting for longer than 30 day periods due to short sales and new construction.
(required disclosure) All Kirkland 98052 Home Sale stats above are hand compiled by ARDELL and not compiled, published or verified by NWMLS.
28 month supply of condos in the $475,000 to $750,000 segment
2nd in the series "Every Picture Tells a Story, Don't It?" - Kirkland98033 - condos.
The red segments represent Condos For Sale (165) For the key code, you need to read the segments clockwise from the top, or simply refer to the explanation below the graph.
Breaking it into 3rds, you have about 1/3 in the under $475,000 segment, another third or so in the $475,000 to $750,000 segment and the remaining third in the over $750,000 market.
All blue segments represent Pending Sales
All green segments represent Closed in the last 90 days
Remember the green sold portion is 90 days of sales. The pending is currently pending regardless of when the property went into contract. Let's assume all pendings are not going to close and use 1/3 of the green portion for calculating Absorption Rate of current inventory (red segments)
Under $475,000 = a 7.3 month supply of condos (56 divided by (23 divided by 3) = 7.66)
$476,000 to $750,000 = a 28 month supply of condos (56 divided by (6 divided by 3) = 28)
Over $750,000 = an 18 month supply of condos (54 divided by (9 divided by 3) = 18 )
What you want to think about here is if you think you are going to list your condo for sale after the first of the year for $650,000 in Kirkland 98033...what are you going to do to reduce the odds of selling in 28 months time? Not many people want it to take over 2 years to sell their condo. But you have 56 people in front of you before you even get into the market and only TWO have been selling every month for the last 90 days. That's a long way to go to absorb those 56 condos without counting what comes on market after Jan. 1, 2009.
If you did absorption rate of condos in 98033 by dividing total for sale of 165 by the total number pending of 15, you would come up with an overall absorption rate of 11 months of supply. If you used 1/3rd of sold in 90 you would have a 13 month supply. But I think the picture above is more transparent as to the odds of selling in the near future for individual condo owners.
(required disclosure) All Kirkland 98033 Condo stats hand compiled by ARDELL and not compiled, published or verified by NWMLS.
Over $1.2M = a 49.3 month supply of homes (115 divided by (7 divided by 3) = 49.3)
1st in the series "Every Picture Tells a Story, Don't It?" - Kirkland98033 - SFH.
The red segments represent SFH For Sale (total 336). For the key code, you need to read the segments clockwise from the top, or simply refer to the explanation below the graph.
Breaking it into 3rds, you have about 1/3 in the over $1.2M range, another third or so in the $500,000 to $800,000 segment and the remaining third is split 1/3 in the under $500,000 market and 2/3rds in the $800,000 to $1.2M range.
All blue segments represent Pending Sales
All green segments represent Closed in the last 90 days
Remember the green sold portion is 90 days of sales. The pending is currently pending regardless of when the property went into contract. Let's assume all pendings are not going to close and use 1/3 of the green portion for calculating Absorption Rate of current inventory (red segments)
Under $500,000 = a 6.7 month supply of homes (38 divided by (17 divided by 3) = 6.713)
$500,000 to $800,000 = a 19.6 month supply of homes (111 divided by (17 divided by 3) = 19.61)
$800,000 to $1.2M = a 21.6 month supply of homes (72 divided by (10 divided by 3) = 21.62)
Over $1.2M = a 49.3 month supply of homes (115 divided by (7 divided by 3) = 49.3)
What you want to think about here is if you think you are going to list your home for sale after the first of the year at $1.6M in Kirkland 98033...what are you going to do to reduce the odds of selling in 50 months time? Not many people want it to take over 4 years to sell their house. But you have 115 people in front of you before you even get into the market and 50 of those are brand new homes built in 2008. Only TWO of the homes pending and sold in the last 90 days are new houses in this price range. That's a long way to go to absorb those 50 new houses without counting what comes on market after Jan. 1, 2009.
If you did absorption rate of SFH 98033 by dividing total houses for sale of 336 by the total number pending of 19, you would come up with an overall absorption rate of 17.6 months of supply. If you used 1/3rd of sold in 90 you would have a 20.6 month supply. But I think the picture above is more transparent as to the odds of selling in the near future for individual home owners.
See next post for the 98033 condo market.
(required disclosure) All Kirkland 98033 home stats hand compiled by ARDELL and not compiled, published or verified by NWMLS.
Nov. 25, 2008 - Don't Rely on The Appraisal as your "safety net"
Changing markets create the need to update our thinking on various segments of the home buying process. Back in March of 2006 I wrote this post on the role of the appraisal in your home purchase.
While the basic principles of where the appraisal fits in the process have not changed, the expectation of where the appraisal is going to fall, has reversed. Up market vs. Down market can affect an appraisal dramatically. That is why it is very important for you to understand how an appraiser derives a home's value.
Below is how I personally expect markets to function on a long term basis. An appraiser uses hindsightto determine the value of a property. Consequently in an up market, theoretically the appraisal should come out lower than sale price. If one values the property based on the last 3-6 sales in the last 3-6 months, clearly in an up market appreciation would be somewhat contained by the lender protecting themselves from markets advancing at too rapid a pace. We all know that is not what happened in recent history, and the Country and Banks are now suffering as a result.
But where do we go from here, and how does that affect YOU as a home buyer? Moreso than EVER in most of our lifetimes, you need to NOT depend on the appraisal as a barometer of value. In hindsight in a DOWN market, the appraiser is ALWAYS looking at higher priced sales. If the market is dropping at a faster rate than an appraiser will apply at the end of the process, the onus will be on you to know where your local market is going.
Often appraiser guidelines are national to a greater extent than they are local and micro local. The appraiser works for the bank, not for you, even though you pay the cost of the appraisal. We all know how well the appraisers covered the butts of lenders over the last few years...a great big NOT! Likewise YOU should not depend on the appraisal to cover your butt as to home price in your real estate purchase.
Understand that appraisers use hindsight...you must use all resources at your disposal to determine not only where the market IS, but where it is heading in the hyper-local market of where you are buying a home.
Earlier today I sifted through 28 short sales closed within the last 6 months and 100 Bank Owned Properties closed within the last six months.
By and large they are selling pretty close to asking prices, with those prices dropping in small intervals and frequently while the home is on market. The better and newer houses tended to sell short, while the older ones ended up in foreclosure and selling as bank owned properties.
The better values in many cases were the properties that were selling short of the original purchase financing, vs. those that were selling short of inflated appraised values at time of refinance after purchase. Those based off true market value, purchase price, were selling close to 2008 assessed values. Many were selling over asking price.
Simply being a bank owned property or a short sale did not relieve the buyer of determining current fair market value (which is pretty much at October 2005 levels per my previous post.
ARDELL
DellaLoggia
On Seattle Real Estate including Kirkland, Bellevue, Redmond, Green Lake and most areas around Lake Washington North of Downtown Seattle.
Phone: 206-910-1000 - Mailto:Ardell@RainCityGuide.com
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member Remember, the green sold portion is 90 days of sales. The pending is currently pending regardless of when the property went into contract. Let's assume all pendings are not going to close and use 1/3 of the green portion for calculating Absorption Rate of current inventory (red segments)
