Seattle 2008 Real Estate Recap

To sum up 2008...challenging at best, but with some great potential in 2009. Here are the highlights of an article in the Seattle Times on 12/28/2008

Click here to see article

• Home/condos prices down through Oct. 2008 2.2%, with new home prices down 4.3%.



• 2008 was predicted to drop about 5% a year ago by Matthew Gardner.



• Prediction- first half of 2009 we will continue to see prices going down, last half we'll start to see an upward trend, due to good interest rates and available money for loans.



• Home sales down for 2008 due to several factors. It had been predicted that 2008 would be about the same as 2007, which didn't happen.



• Foreclosures - home price declines are the biggest driver of foreclosures, not resetting mortgage interest rates. Tough call to know when it will end. When supply and demand are in equilibrium then that will help.



• Renting - rates climbed 7% in 2008. Vacancy rates are expected to climb to 6% as new apartments come on the market and some renters decide to co-habitate. Rent rates predicted to stay the same or increase.

Call or email if you want more information of if I can be of service.

Great buys can be had. 12/24/2008

A client of mine is in the process of buying a 3-bedroom condo, which will close early January 2009. We just received the appraisal back from the lender and it appraised at 12.5% HIGHER than our purchase price. Most appraisals are coming in very conservatively priced due to the concerns lenders have with the value of properties currently being financed. I wouldn't be surprised if the condo could sell for even more than the appraised value. My client has instant equity in this condo and as the market continues to firm up he will be able to capitalize on that equity.

Why the bubble burst? Are some markets undervalued?

Two interesting articles in the paper today; one discusses why there was a real estate bubble burst. It says through the first half of this decade median household incomes dropped, the poverty rate/unemployment and house values increased causing the average worker to get further behind. Americans financed their spending habits by treating their houses like giant ATM's. I had read another article in the NY Times stating the same thing but using statistics instead. Once home prices rise above a certain percentage then homeowners stop buying.

Second article says some markets are now way undervalued; Modesto CA, Naples FL, Las Vegas NV and Des Moines IO are all undervalued between 11-23%. The study considered interest rates, household incomes, population densities and historic data to determine fair value.

Unemployment on the rise...

The news of over half a million people losing their jobs last month was not good news. Unemployment is the same as it was in 1974. I was alive back then but to young to remember what the climate was like. I did hear a follow up on NPR about the unemployment figures. The overall unemployment rate is 6.7% but of those that have a college degree that figure drops to 3.1%. It pays to be educated.

Condos and Homes to be auctioned in Dec 08 - trend?

I think a trend is starting in Real Estate here in Seattle and some good real estate deals will be made for those ready to make an offer.

This past weekend I saw 3 ads for coming auctions. One is in a condo building on Capitol Hill in which I happen to own a rental. I personally think it's a great building, well constructed (Harbor Properties) and the condo conversion was very well done. Minimum bids starting @ 40% less than current asking prices.

There are also 90+ homes to be auctioned, some east and some west of the mountains. Those east could be great vacation/2nd homes. Those on this side are close in enough for commuters. Everett (Silver Lake), Lake Stevens and Issaquah are the areas where properties are located. New homes...great prices.

The auction company is out of California, where auctions are more commonplace than in our area. In a previous posting I detailed an auction I attended several weeks ago. There were some great deals but not all of them were great. The auctioneers work to get the crowd excited to get the prices up. Good strategy - take your client, determine a maximum price you will pay for your desired properties and then don't bid once the auctioneer starts the bids. By jumping in quickly it only increases the price quicker and could surpass your determined amount quicker.

I think we will see a few more auctions but luckily Seattle doesn't have the amount of inventory that other markets are currently carrying.

FHA Financing - Great option for First-Time Home Buyers

There is money to borrow to be able to purchase your first home or condo. The pendulem has swung back to a more traditional method of lending; a borrower has to have good credit, a steady income that can be verified and overall be a good credit risk. For several years not too long ago all you had to do was be breathing in order to get a loan.

The program was little used over the last 8 years or so because of the many possible loan programs (500+) that were on the market. Now that there is a more reasonable amount of programs (30-40) on the market FHA has made a strong comeback.

The FHA program takes a little up-front work but once you are approved the rest is pretty easy. It requires only 3% down (that will change to 3.5% on 1/1/2009) making it easier to buy a property will less money out of your pocket.

Please feel free to contact me for more details.

Seattle to Recover Quickly - Forbes.com article

A great article was published in Forbes.com on 10-29-2008. It states that on a scale of 1 to 9 Seattle scores the highest at 6.15 in the country. That doesn't mean that everything is rosy but that we are well positioned to weather the storm better than many other markets.

Due to a diverse business base and control on new construction Seattle isn't totally gloom and doom.

http://www.forbes.com/2008/10/29/foreclosure-recession-cities-forbeslife-cx_dp_1029realestate.html

Seattle area housing shortage predicted by local consultant

Seattle Times PI, Saturday October 18, 2008. Housing Gets Hammered.

Building comes in cycles. It's all about supply and demand. One challenge with building is there is always a long lag time from when demand picks up and supply can actually be on the market. This leads to the market usually being behind the 8-ball when the demand rises. Currently there is too much product on the market and builders are giving discounts to get this product purchased. It's happening in Seattle as well, just not as much as in other areas.

Nationally housing starts are down to the lowest level since 1945. Applications for new homes has dropped 8.2%, the weakest level in more than 25 years.

Locally a housing consultant, Todd Britsch, predicts that there will be a housing shortage in Seattle in 2011-2012. The request for new building permits in King, Pierce and Snohomish county is down 35 percent year-to-date. He believes that an over-supply of new lots over the last few years is causing developers to stop requesting permits. Once the current inventory comes off the market (purchased) it will take a while for builders to ramp up and get new product built.

That's when the housing shortage hits and appreciation starts to kick in. Go to RECENT MEDIA for the entire article.

Auction Results

Just a quick update on the auction I mentioned a couple of weeks ago.

The auction was yesterday and about 30 bidders were there and about 120 people in the room. There were 17 condos for sale so the odds were pretty good on getting a condo if you really wanted one. There was a minimum bid for each type of unit. After the first 13 sold the Seller stopped the auction. I believe it was because they were not getting as good of prices as they had anticipated. They sold the first 13 from about 25%-46% under the current asking price. The current asking prices were about average for similar condos currently for sale in the area so getting a condo that much under the asking price is incredible. All the condos had new kitchens, bathrooms, flooring, new roof, siding and windows.

Deals of the day;
Studio condo w/out parking sold for $102k. The average price for Studios on Cap Hill w/out parking is $200k. The cheapest co-op on Cap Hill is a dump for $115k.
2 Bedroom/1 Bath top floor w/parking and a view of the Space Needle sold for $278k. The average price for 2 Bed/1 Bath condos on Cap Hill is $356K.
1 Bedroom w/parking sold for $205k. The average price for a 1 Bed condo w/parking on Cap Hill is $332k.
With such low pricing the Seller has put himself in a sticky situation. Future purchases will be based on these prices so anyone else buying in this building should be able to purchase well below current rates.

There are still about 11 condos for sale in this building. Please let me know if you are interested in getting more information as I feel confident that a good deal can still be had, just not through the auction process.

Auction of Condos

Here is something new for Seattle condo projects - an auction to get some of the condos sold.

1707 Condominiums on Capitol Hill will be auctioning off 17 condos on Sunday, October 19th. There is a minimum bid of $95k for Studios, $195k for 1 Bedroom units and $215k for 2 Bedroom units. These minimum bids are up to 47% off the current list price, which can be a great buy if you can get any of them at the minimum price.

According to the on-site team the developer is fine financially but wants to get some units moved before the quite months of November/December. They are asking for a $2,500 deposit and you must close in 30 days. Monthly dues are about $180-$205 depending on the unit (25-45 cents psf), which is pretty good.

It's a basic building w/out a lot of amenities in a great location, just one block west of SCCC. It could be a great first-time Buyer condo or a great rental, depending on the final sales price.

Developers are hoping for 70-80 bidders. I'll be there with a client and will let you know if any great deals were found.

September 13, 2008 - Seattle market

The Seattle Real Estate market has been on a roller-coaster ride since last August 2007, when the lending crisis first hit the news. Prior to that there was already a trend of homes sitting longer on the market that started in June of 2006 so the "crisis of 2008" only added to a trend that started a while ago.

2005 and 2006 were record years for Seattle, so anything comparing back to that time will most likely show negative figures. Even with that said if you had purchased a home in January 2004 it would have grown in value by 53% as of June 2008.

Even in this slower market (the average time on the market for a piece of property is about 7.4 months) there are still many good qualities that the Seattle area has that other areas don't have;

• A large employment base in many different areas (Microsoft, Boeing, Weyerhaeuser, Amazon, Starbucks, Import/Export to Asia, Bio tech, Alaska Airlines, etc.) most of which have a national or international reach.
• Projected job growth. Though there have been some hiccups this summer (Weyerhaeuser and Alaska both announced that they will layoff up to 1,000 employees each) there are other companies that have projected growth for the next several years (Boeing will hire @4,000 employees/year for the next 2 years and Microsoft will hire @5,000 employees/year for the next 10 years.
• Limited construction growth. Due to local topography there is only so much buildable land. The mountains, lakes, streams and hills prevent the overbuilding that has occurred in other markets, many of which are REALLY suffering at this time.
• Prices are still much less than other major metropolitan areas on the west coast. Even with the strong appreciation over the last couple of years Seattle is still one of the least expensive big cities to buy property.

It is still a great time to buy. See the Recent Media section to see articles on the Condo Shortage in Seattle and other great articles specifically about our local Real Estate Market.