Buyers see some hope in cooling Seattle real estate market

Catherine Horne and Joe Hicks rent a home in Maple Valley. And while they like it, they’d rather be homeowners.

And it’s been a frustrating couple years to be a home buyer in the Seattle market.

“It’s tough, it is,” said Horne.

“Lo and behold, it turned out it wasn’t as easy as we thought it was going to be,” said Hicks.

After losing several homes to same-day cash offers, they started to give up. They decided to spend another year renting and wait to see what the market did.

“Time and time and time again, it’d get pulled out from underneath us,” said Hicks.

They felt overwhelmed watching home prices climb.

“That was part of it, like gosh, two years ago this house was worth $400,000, now it’s $600,000,” said Hicks. “Like boy, I wish we could have got in on that.”

It’s why they’re interested to see the latest trend in the Seattle housing market – Zillow senior economist Aaron Terrazas calls it a normalization.

“Obviously, we’ve become accustomed to having the hottest housing market in the nation,” he said. “That’s rapidly shifting.”

New data from Zillow released Thursday illustrates his point. Researchers found home values appreciated 9.1 percent in the last year, down 14.2 percent from July 2017.

Terrazas noted that still above the historical average – around 5.5 percent.

“It’s still tough, yeah,” he said. “We used to be the fast housing value appreciation, now we’re number 12, so certainly things are starting to slow down.”

He predicts appreciation will continue to slow in the next year to approximately 6-7%.

Seattle has now been passed by cities like Dallas and Atlanta, he said.

“I think it’s a signal of buyers being stretched, a signal of changes in our tax laws,” he said. “Which kind of reduced those benefits to ownership, especially in inexpensive markets.”

The Zillow research also found median rent rose just .3 percent over the past year to $2,173. Last summer, rents were appreciating 5.3 percent annually. Terrazas noted that might be relieving pressure on people that might be looking to purchase homes.

There’s also more housing inventory on the market – 13.2 percent more.

~Michael Crowe, King5News

What First-Time Home Buyers Need to Know

My team and I regularly come in contact with first-time homebuyers looking for some guidance. The prospect of buying your first home can be an anxiety-inducing one, especially if you don’t know where to start. I’ve spent my career helping thousands of people find the perfect home, so I’m happy to shed some light on the subject for those new to the process.

Patience is key.

Even after you spend hours searching through listings and going to showings, your journey is far from over. Getting a mortgage, having the home inspected and going through the closing process all take time. General wisdom suggests that the process could last from 30-90 days, but that depends on a lot of extenuating factors.

The neighborhood you choose is important.

We believe the neighborhood you live in is just as important as the home you live in. When you make a purchase based solely on the number of bedrooms and bathrooms or square footage, you’re missing out on the lifestyle component of your new home. Where you live will determine not only obvious factors like where your children go to school and how much you pay in taxes, but it also determines more nuanced factors, like how you spend your weekends. Spend time in an area before deciding to buy there, and see if you can really imagine yourself living there on a day-to-day basis.

Have your documentation ready.

Keeping everything digitally organized — rather than trying to keep track of a stack of papers — will help immensely. Have pay stub statements, proof of assets and any loan or credit card debt documentation readily available. Expect to present more paperwork than you might think they need to see. Like a Boy Scout, the key here is to always be prepared!

Be flexible.

One sentiment that almost all of the homeowners we asked expressed is just that: the importance of being flexible. You may have a list of features that make up your perfect home but ultimately discover that you are unable to find all of those features within your budget. Know which “must-haves” you’re willing to compromise on and which ones you really need. If a short commute is most important to you, you may be willing to sacrifice an extra bathroom or granite countertops to be closer to work.

Follow guidelines.

In other words, don’t buy beyond your means. Deferring principal payments in order to get into a bigger home is often a risky proposition that can lead to financial strain. Work out a budget that’s realistic, and then stick to it. Not sure how much house you can actually afford? NerdWallet provides a calculator to help you determine that based on location.

Shop around.

Like any other major purchase, it’s important when buying a home to weigh your mortgage options. Different banks may offer different rates, so getting a wide range of offers can save you money. Planning ahead is your friend in this scenario — as soon as you think you may be interested in buying a home, start the mortgage process. This will also help you determine how much you can feasibly afford.

Don’t let fear stop you.

There’s no doubt that the home-buying process can be daunting — and for first-time buyers, the uncertainty can lead to dread. You will experience a range of emotions in the pursuit of finding your perfect home, but it will be worthwhile when you finally settle in.

At the end of the day, buying your first home will be an intensive process, but it doesn’t need to be a scary one. If you go in with a strong plan and know your facts, you’ll avoid making the wrong choice or missing out on a great deal.

~Bill Ness, Forbes Community Voice

It’s going to get worse for Renters!

We often promote homeownership over renting when a family is ready, willing and able to purchase. There are both financial and non-financial benefits to owning a home of your own. Based on the headlines below, many news outlets agreed with us after they reviewed a recent report from the Harvard Joint Center for Housing Studies and Enterprise Community Partners.

The study states that the number of households spending 50% or more of their income on rent is expected to rise by over ten percent in the next decade. They concluded:

“Overall, this white paper projects a fairly bleak picture of severe renter burdens across the US for the coming decade.”

What do other experts think of the report? You can tell by the headlines they chose to introduce their stories:

“Renters, get ready to take it on the chin” – CNBC

“The Rent Crisis Is About to Get a Lot Worse” – Bloomberg Business

“Renters Will Continue to Struggle for the Next Decade” – World Street Journal

“Why the renting crisis could be about to get a lot worse” – Fortune Magazine

“Soaring rents are a problem that will only get worse” – Business Insider

“High rents are here to stay” – The Real Deal

Bottom Line

If you are thinking about buying a home and are financially positioned to do so, now may be better than later.

What’s happening with mortgage rates?

According to the Associated Press, the nationwide average for a 30-year mortgage declined to its lowest level since May 2013

Average long-term mortgage rates in the United States fell for the fourth consecutive week, a continuing boon for potential home buyers, and the number of people seeking unemployment benefits slipped below 300,000 last week, according to data released on Thursday.

The mortgage company Freddie Mac said the nationwide average for a 30-year mortgage declined to 3.89 percent this week, from 3.97 percent last week. It is now at its lowest level since May 2013.

Weekly applications for unemployment benefits fell 17,000 to a seasonally adjusted 297,000, the Labor Department reported. Applications spiked in the previous week for the first time in nearly three months. The four-week average, a less volatile measure, rose 4,750 to 299,000 for last week.

Applications for benefits are a proxy for layoffs. As fewer people seek unemployment benefits, it suggests that employers are holding onto more workers and potentially looking to bolster their hiring.

Applications have been under 300,000 for 11 of the last 12 weeks, an unusually low level that suggests employers are anticipating stronger economic growth. The four-week average for jobless claims has plummeted 9 percent over the last 12 months.

Such sharp declines in applications are unlikely to continue, analysts said. But at sub-300,000 levels, they point to better job gains in the Labor Department’s employment report, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“The trend probably has now flattened off, but at an extraordinarily low level, consistent with very strong payroll numbers,” Mr. Shepherdson said.

The November jobs report scheduled to be released on Friday is expected to show gains of 225,000 last month, according to the data firm FactSet.

Mortgage rates are about a half-point lower than at the beginning of the year, when the benchmark 30-year rate stood at 4.53 percent. Rates have fallen in recent weeks in the face of slowdowns in Europe and China and the start of a recession in Japan.

Mortgage rates have been falling despite the recent end of the Federal Reserve’s monthly bond purchases, which were intended to keep long-term rates low.

Home Prices Up 12.9% from Last Year: Case-Shiller

 In recent housing news, the latest Standard & Poor’s/Case-Shiller Home Price Index tracked a 0.8 percent rise in February based on a seasonally adjusted basis. This is slightly better than the predictions of national economists. A Reuters poll of economists had forecast a 0.7 percent rise.

Nationwide home prices were up 12.9 percent on a year-over-year basis, and while the numbers—released on Tuesday– seem to indicate a healing market, the U.S. home prices were actually nearly unchanged in February, after slumping 0.1 percent in each month since November, according to the 20-city composite index. The 12.9 percent year-over-year February basis, while seemingly positive, actually shows that price growth is slowing down.

Numbers were down from 13.2 percent in January, and fell even further from the peak of 13.7 percent in November. Additionally, the percentage lands just a smidge shy of the predicted year-over-year basis, which had weighed in at an expected 13 percent.

“Despite continued price gains, most other housing statistics are weak,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices, who cited new and existing home sales data. “The recovery in housing starts, now less than one million units at annual rates, is faltering. Moreover, home prices nationally have not made it back to 2005.”

Zillow Chief Economist Dr. Stan Humphries, commented, “Like pending homes sales numbers yesterday, the Case-Shiller numbers today are generally pretty positive. Behind the flat unadjusted monthly change is a large seasonally adjusted change in home prices. It’s good to have some positive signs amidst some of the sluggish news of late,” “The housing market is showing signs of slowing, but this was expected and is part of a broader return to normal as appreciation slows down,mortgage rates inch up and more balance between buyers and sellers emerges.

Homeownership still represents a good bargain for those that can afford it and can find a suitable home. But affordability issues are becoming an issue in a few markets, and those problems will only get worse as mortgage interest rates rise.”

Pending Sales Change Course

In other real estate news released this week, the Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, increased 3.4 percent in March to 97.4 from an upwardly revised February level of 94.2. The PHSI monthly increase reported by the National Association of REALTORS® was the first since June of 2013, although it remains 7.9 percent below the level of 105.7 last March.

The March PHSI increased in the West, South and Northeast by 5.7 percent, 5.6 percent and 1.4 percent respectively, but fell slightly in the Midwest. Year-over-year, all of the regions were down, ranging from decreases of 11.1 percent and 10.1 percent in the West and Midwest to decreases of 5.9 percent and 5.3 percent in the Northeast and South.

Last week, Census reported a 14.5 percent decrease in March new home sales. Extreme weather was a factor in decreased new and existing home sales at the beginning of the year. The March increase in the PHSI suggests that the existing home market will move forward throughout the spring. The growth in household formations and strong pent-up demand will maintain that momentum throughout this year.

~RIS Media

Mortgage Rates Fall Ahead of Spring Buying Season

Mortgage rates seem to be doing their part to spur the spring home-buying season, according to the latest data released Thursday by Freddie Mac.

After two weeks of increases, the 30-year fixed-rate average fell back to 4.34 percent with an average 0.7 point. It was 4.41 percent a week ago and 3.43 percent a year ago.

The 15-year fixed-rate average also edged down, falling to 3.38 percent with an average 0.6 point. It was 3.47 percent a week ago and 2.65 percent a year ago.

Hybrid adjustable rate mortgages declined as well. The five-year ARM average dropped to 3.09 percent with an average 0.5 point. It was 3.12 percent a week ago and 2.62 percent a year ago.

The one-year ARM average sank to its lowest level of the year, sliding down to 2.41 percent with an average 0.5 point. It was 2.45 percent a week ago.

“Mortgage rates eased a bit following the decline in 10-year Treasury yields,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement.

“Also, the economy added 192,000 jobs in March, which was below the market consensus forecast but followed an upward revision of 22,000 jobs in February. Meanwhile, the unemployment rate held steady at 6.7 percent.”

Mortgage applications continued to decline, according to the latest data from the Mortgage Bankers Association.

The Market Composite Index, a measure of total loan application volume, fell 1.6 percent. The Refinance index dropped 5 percent, while the Purchase Index showed an uptick for the third week in a row, increasing 3 percent.

The refinance share of mortgage activity waned for the ninth week in a row. Refinances accounted for 51 percent of all applications, their lowest level since July 2009.

~Kathy Orton, Washington Post

Five reasons to buy a home now

Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying.

1. Competition is about to Increase

Every spring a surge of prospective purchasers enter the housing market. Like you, they will want the best home available in the best location at the best price. They will be competing with you for the ‘steals’ in the market. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy available today that no longer be available as the market heats up..

1. Price Increases Are on the Horizon

Nationally, home prices are projected to appreciate by 4.5% in 2014 and by over 19% from now until 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

1. Owning a Home Helps Create Family Wealth

Whether you rent or you own the home you are living in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Federal Reserve, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

1. Interest Rates Are Projected to Rise

The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the spring of 2015. That is an increase of almost ¾ of a point over current rates.

1. Buy Low, Sell High

Most would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.

~ KCM Blog

Moving-Up? Do it NOW not Later

A recent study revealed that the number of existing home owners planning to buy a home this year is about to increase dramatically. Some are moving up, some are downsizing and others are making a lateral move. Another study shows that over 75% of these buyers will, in fact, be in that first category: a move-up buyer. We want to address this group of buyers in today’s blog post.

There is no way for us to predict the future but we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.

Assume they had a home worth $300,000 and were looking at a home for $400,000 (putting 10% down they would get a mortgage of $360,000). By waiting, their house appreciated by 13.8% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $341,400. But, the $400,000 home would now be worth $455,200 (requiring a mortgage of $409,680).

Here is a table showing what the additional monthly cost would be incurred by waiting:

                       

Prices are projected to appreciate by over 4% and interest rates are also expected to rise by as much as another full percentage point. If your family plans to move-up to a nicer or bigger home this year, it may make sense to move now rather than later.

~KCM Blog

 

2013 MLS Annual Review

Brokers report nearly $25.5 billion in 2013 sales

Members of Northwest Multiple Listing Service reported 75,517 closed sales during 2013, surpassing the 2012 volume by around 11,000 transactions for an increase of nearly 17 percent. Measured by dollars, last year’s sales of single family homes and condominiums were valued at nearly $25.5 billion to outgain the previous year by more than $5.5 billion (up 27.4 percent).

Last year’s completed sales included 65,122 single family homes and 10,395 condominiums, as tallied by nearly 21,000 real estate brokers in the 21 counties that make up the Northwest MLS service area.  The total units and dollar volume are the best since 2007 when members registered 82,197 sales valued at $32.3 billion.

The area-wide median price for last year’s sales was $270,000, improving on the previous year’s figure of $245,000 (up 10.2 percent). A comparison by county shows median sales prices ranged from $118,750 in Pacific County to $372,000 in King County.

Prices for single family homes (excluding condominiums) also rose 10.2 percent from 2012, increasing from $255,000 to $281,000. Condo prices jumped 15.3 percent, rising from the 2012 figure of $175,200 to last year’s median price of $202,000.

By one measure, buyers who shopped during 2013 had a bigger selection as members added more than 104,000 listings to inventory during the year. That was an improvement over 2012 when members added 91,359 new listings. However, brisk sales meant the total number of active listings, which averaged 21,946 during 2013, fell below the previous year’s average of 24,604.

During 2013, the area-wide supply, as measured by months of inventory, ranged from a low of 1.95 in March to 3.68 in December. Industry watchers tend to use a 4-to-6 month range as an indicator of a balanced market, favoring neither buyers nor sellers. Supply tended to be tightest in King and Snohomish counties.

Further evidence of a housing recovery is reflected in high-end sales. Northwest MLS members reported 1,621 sales of single family homes priced at $1 million or more, up 45.2 percent from the 2012 total of 1,116 such sales. Condos priced at $1 million and up accounted for another 137 sales, about the same number as 2012 (138 sales).

The highest-priced single family home that sold during 2013 by a member of Northwest MLS was a property in Medina that fetched $9.75 million. A penthouse in downtown Seattle that sold for $6.2 million topped the condo list.

Among other highlights in its annual compilation of statistics, Northwest Multiple Listing Service reported:

• Single family homes accounted for 86 percent of last year’s residential sales.
• Nearly half (49 percent) of last year’s single family home sales were 3-bedroom      homes. More than three-fourths (77 percent) of condos that sold had 2      bedrooms.
• The median price for a 3-bedroom home that sold in 2013 was $250,000. A      comparison by county shows the median price for this size home ranged from      $128,000 in Pacific County to $450,000 in San Juan County.
• Of the condo sales, about two-thirds (64.1 percent) were located in King      County. Within that county, the Eastside edged out Seattle for the largest share (39.7 percent versus 37 percent).
• Last year’s sales included 8,298 newly built single family homes that sold for a median price of $325,000, and 846 condos that sold for a median price of      $350,214.
• A 10-year comparison of median prices of single family homes shows prices      peaked in most counties in 2007. In 2013, Grant County selling prices returned to 2007 levels, Okanogan prices were at 96.7 percent of 2007 prices, and King County prices were at 91.2 percent of 2007 prices. Other counties have not yet reached those levels, but most are experiencing steady gains.
• Prices vary widely among school districts. An analysis of some of the largest      districts in the MLS market area shows single family homes on Mercer Island have the highest prices, followed by homes in the Bellevue, Issaquah, Lake Washington and Bainbridge school districts.

Why 2014 is a Good Year to Buy a Home

If you didn’t buy a home in 2013, you may be kicking yourself now. Home prices climbed nationally an average of 13.6 percent in the past 12 months, according to Tuesday’s release of the Standard & Poor’s/Case-Shiller 20-city home price index.

Don’t make the same mistake in 2014, suggests Benjamin Weinstock, real estate attorney and partner at the firm Ruskin Moscou Faltischek in Uniondale, N.Y.

Market forecasters predict that 2014 will be another year of gains for the real estate market, even though the rapid pace of sales in 2013 cooled off a bit at the end of the year. On Dec. 30, The National Association of Realtors said its pending home sales index, based on contracts signed last month, rose 0.2 percent in November, below the 1 percent rise forecast.

Home prices are expected to rise about 5 percent next year, says Weinstock. Higher mortgage rates will dampen the pace of both sales and price gains, but not bring them to a halt. The average rate on a 30-year fixed mortgage is expected to rise from 4.5 percent to 5 percent in the next year.

Even aside from expected price gains, buying a home is almost always a good investment in the long run, says Weinstock. Tax benefits are not to be overlooked.

“When one rents, at the end of the year he or she has a pile of 12 cancelled rent checks,” Weinstock says. “However, the homeowner has a pile of 12 cancelled mortgage checks that are nearly fully tax deductible in most cases.”

~Amey Stone, CBS Money Watch