We’re more than halfway through 2014 and nationally we have seen a “mixed bag” when it comes to the housing market. Although the market overall is strong, the first quarter did not perform as well as hoped, due in part to a challenging weather patterns and demand outweighing supply in many areas.
Since the number of homes available for sale (also known as ‘inventory’) has been low, buyers in some areas are competing via multiple offers for properties. According to the National Association of REALTORS®, national inventory improved somewhat in the spring, causing sales to surge in May. In fact, the 4.9% increase in sold properties in May was the strongest month-over-month increase since August of 2011. However, this is still 5% lower than May of 2013. And in June, after three consecutive months of solid gains, pending home sales slowed modestly.
While looking at data provides a look at overall market health, I know what is most important to you is what this means for your property value! I would be happy to go over how your neighborhood is faring and what I expect in the coming months. Currently I am booking mid-year property reviews and I would like to book yours! Please give me a call at 206-790-0081 or send me an email.
Calling in the Experts – An inspection may be a great first step, but it may not tell the whole story.
When buying a home, most buyers know they should get an inspection to point out certain deficiencies that may not be apparent to the naked eye. However, did you know that in some cases an inspector is qualified to point out certain defects but not qualified to provide a full scope of the potential problem? That is when you may need an expert.
I think of inspectors as general practitioners in the medical field. They excel in routine appointments, assessments and can, in most cases, track down ailments based on symptoms and can usually prescribe an effective course of action. However, for more-complicated cases, they usually refer to a specialist.
There are a number of property specialists who can be called in to provide a full report and determine potential solutions for deficiencies identified by an inspector such as:
- Roofing challenges
- Pest infestations
- Chimney structure issues
- Heating and air conditioning challenges
- Foundation and structural concerns
- Pool and spa matters
- Mold concerns
- Water drainage challenges
- Sewer system connection problems
- Tree concerns
- Well flow issues
- Soil or erosion challenges
For example, say the inspector points out a deficiency in the roof: Some shingles are missing and the moisture sensor picks up higher-than-expected moisture in the roof area below. The inspector may suggest calling in a roofing expert to not only fully ascertain the extent of the damage, but also the best way to fix it. The specialist’s report and recommendations allow the potential buyer to either request the seller fix the problem before the sale or choose to fix the roof themselves after purchase.
There may be additional items you want to evaluate on a potential property before purchasing depending on your specific needs. For example, if your ideal landscaping design plan for your new home hinges on building a retaining wall against a steep hill on the back of the property, you may need to call in a geo-engineer to evaluate the steepness of the slope and the soil wetness and content to determine if a retaining wall is viable.
Since the buyer is responsible for paying for the inspection, calling in additional specialists would also be the financial responsibility of the buyer. However, in my experience, paying a few hundred more than you were expecting at the outset can do wonders to provide peace of mind. Give me a call to find out more: (206) 790-0081 or send an email.
Changes are coming to the mortgage arena.
If you had a short sale at least 2 years ago and have 20% down, you’ve been able to obtain a new mortgage. Fannie Mae is changing the rules (and Freddie Mac will likely follow) as of August 16th. Now you’ll need to wait 4 years after a short sale before you can obtain another mortgage. If you’re currently in the 2 year+ period and are buying a home, you’ll need to close by August 15th.
As you may have heard the economy is improving. The jobs reports have been great. As a result, the Feds are leaning toward reducing bond purchases in October. When this happens, it’s likely interest rates will increase. Even 1/2 percentage increase in interest rates will affect your buying power.
For every $100,000 that is mortgaged at 4.25%, you will pay approximately $492/month in principal and interest. When mortgage rates increase half a percent to 4.75%, your monthly payment increases $30 to $522. On a $100,000 mortgage that’s not significant, but on a $500,000 mortgage, that’s an increase of $150/month.
Let’s take this further.
With prices on the rise and multiple offers the norm, that $500,000 budget you may have may instead now be $477,000. Let me explain. You have $100,000 for a down payment. Your lender has approved you for up to a $500,000 home ($400,000 mortgage) at 4.25% interest, with a monthly payment of around $1,968 in principal and interest.
Interest rates are now 4.75%, a half percent increase. Your lender only approves you for the same $1,968/month payment. You can now only afford a $477,000 mortgage (with the same $100,000 down payment). Your buying power has decreased $23,000 or 6%.
For every half a percent that interest rates increase, your buying power decreases by approximately 6%. Your $800,000 buying power becomes $762,000. If interest rates continue on an upward trend, your buying power will continue to decrease.
Please feel free to contact me at 206-790-0081 or email@example.com for further explanation.
A “buyer agency agreement” is a contract between a buyer and a real estate broker. Contracts often vary in length, and can include or exclude certain geographical areas. The buyer agency agreement lays out the commitments of the buyer to the broker, and of the broker to the buyer. Generally the agreement also contains a clause stating that you will work exclusively with that broker for the specified time period. Is it expensive to use a buyer’s broker? The compensation that a buyer’s broker receives (also called the “selling broker”) typically comes from the seller’s proceeds and is a percentage of the total commission charged by the listing company. That information is available to the broker through the Multiple Listing Service (MLS). In such a case, there is no cost for a buyer to be represented by a broker. If a buyer is interested in purchasing a property not listed in an MLS (for example, a for sale by owner), it is possible that the seller will not compensate the buyer’s broker. In this case, a buyer agency agreement would detail the buyer’s obligation to compensate their broker. Typically, even with unlisted properties, the seller compensates the buyer’s broker.
Are you considering purchasing your first piece of real estate? Whether it be a single family home, townhouse, or condo, this buyer class may be for you.
The class will go in depth on both the buying process and on how to obtain a mortgage. You will also learn about down payment assistance programs, where if you earn less than $97,000 per year you may be eligible for no-interest, no monthly payment loans from the state. This course meets the requirement for Washington State Housing Finance Commission down payment assistance programs, including the Mortgage Credit Certificate (MCC) program. The course instructed by Ryan Niles from Cornerstone Home Lending and me.
Two classes are scheduled this summer: Sunday, July 27th and Sunday August 24th. Both classes will run from 10am-3pm and will be in the Wallingford neighborhood.
The course is free and there is no obligation to use our services. We ask that you bring a sack lunch. Please sign-up in advance by contacting me at firstname.lastname@example.org or 206/790-0081. For more information on down payment assistance programs, please go to the Washington State Housing Finance Commission website.
You’re buying a house, but you’re also buying into a neighborhood. You hire an inspector to check out the house before you buy it, but what about the neighborhood? The Neighborhood Review is your opportunity to inspect the neighborhood as well.
A Neighborhood Review can be written into the contract to buy a home. In that case, it states you have X number of days to review the neighborhood and if you are not happy with it, you have the right to get out of your contract. The language reads:
However, in a competitive market, including a Neighborhood Review contingency may make your offer less competitive. I always recommend to clients that they conduct a Neighborhood Review, but they may need to do the research before submitting the offer.
What does a Neighborhood Review entail? It’s really up to you. What’s important to you about where you live? Crime rates or quality of schools, traffic or availability of public transportation, proximity to medical centers or retail areas, environmental issues such as electrical substations? These are all items you may want to research.
One of the best ways to learn about a neighborhood is to spend time there, both during the day and in the evening. Knock on doors and meet your prospective neighbors; ask them questions about what the neighborhood is like.
Below is a list of some places you can learn more, but you might have other ideas as well. If you do, let me know and I’ll add them to the list for other buyers to use.
- http://www.trulia.com/real_estate/Seattle-Washington/crime/ (Trulia, you can search for other cities as well)
- http://www.seattle.gov/police/ (Seattle Police Department)
- http://www.icrimewatch.net/index.php?AgencyID=54528 (WA state sex offender registry)
- http://www.seattleschools.org/ (Seattle School District)
- http://www.greatschools.org/ (Great Schools)
- http://www.walkscore.com/ (Walk Score)
- Many neighborhoods have blogs. Just google that neighborhood name and the word “blog.”
- Explore the neighborhood yourself.
- There are many other websites for checking out amenities—for example, Yelp. Google (or your favorite search engine) is a great way to start.
CCRs and Covenants: Many neighborhoods, housing developments, and condominiums have CCRs or Covenants that list rules such as parking of RVs, exterior paint colors, who is responsible for driveway maintenance, etc. This is also true for items such as shared driveways and townhome roofs. Sometimes you’ll find these covenants and easements in the preliminary title, other times it may be in the homeowner association documents.
As students pack up and head for school, parents often wonder, “Should I buy property that my child can live in while they are at college?”
My answer is “Maybe.”
Not surprisingly, the answer to this question will depend on factors such as the school’s policy on off-campus living, your finances, the level of responsibility your child can handle, the likelihood of your child finishing their education at that school (and whether they will pursue additional education there) and whether you are considering this purchase for the long- or short-term. Let’s look at each of these in a bit more detail.
Off-campus living. Many schools require students to live on-campus for the first year (or even two!) that they are enrolled. More and more students are taking five years to finish school rather than four, but even so if you want to sell the property as soon as the student finishes their undergraduate work, this restriction will cut into the time you have to recoup your equity in the property.
Is your young adult responsible? Will he or she (and their friends!) take good care of your investment? Even the most conscientious student/tenant doesn’t have time keeping up their living spaces. You can, of course, hire someone to handle this for you just as any landlord would – just remember will cut into any profits this investment may generate.
Length of time at school. What happens if your child decides their school isn’t really a fit for them … and heads off to a different school? This is problematic for you as an investor at any time, but particularly so if the change occurs during the first year or two. Once again, you are in the position of being unlikely to recoup your investment.
Your financial situation. Right now we are seeing appreciation annually. However, you have to be prepared for your investment property to depreciate, or remain neutral. Can you and your family handle the impact if, when you want to sell, you will take a financial loss … or be required to hold on to the property until such a time that you can sell? Don’t forget that in addition to your capital investment in the property you will also face additional costs such as taxes, insurance, and repairs.
If you are willing to consider this purchase as a potential long-term investment, and you can live with the consequences of that, purchasing a home for your college-aged child may make sense. It can be a particularly good idea if you have other children who are likely to attend the same college or if your child will be pursuing advanced degrees from the same school. Purchasing a home for your child can also create peace of mind, as you know they will be living in a home which is safe and well-maintained. There’s a lot to be said for that peace of mind, which may outweigh any potential negative consequences.
If you’re interested in purchasing a home for your college-aged child, please let me know … even if their school is not local. I have access to a wide network of talented colleagues, and I would be happy to refer someone to you if appropriate.
The Puget Sound housing market picked up in May with greater inventory, but demand is still very high. Most new listings are receiving multiple offers with many significantly escalating above list price.
The chart above shows activity in the city of Seattle for single family homes and condos combined. The number of homes for sale increased 14.3% over April, but the level was slightly below that of a year ago. The number of sales closing was up 4.4% over April but down 12% from a year ago.
While less homes are selling, prices are up over last year. Combined single family homes and condos in Seattle are up 4.4% over a year ago. On average homes sold at 100% of list price.
Inventory remains extremely low, at 1.4 months worth in May. That is, if no homes came on the market, the current inventory would be gone in about 6 weeks. In May last year that inventory was at 1.2 months.
However, when you look at specific neighborhoods, the numbers can be dramatically different. For example, Wallingford, a high demand neighborhood. Prices on sold homes and condos were up 8.2% from a year ago, with an average sales price of $620,000. Homes in Wallingford average a sales price of 105% of listing price. And inventory in Wallingford was at 0.7 months in May, approximately 3 weeks worth.
For further information, please give me a call or email. I’m happy to provide you with a market update for your neighborhood or city.
On Wednesday I told you it was coming – so here it is. I’ve brought on a listing in Seattle’s hottest neighborhood Phinney Ridge. One and half blocks to Green Lake for outdoor activities, two blocks to the P-Patch, a half mile to the Zoo, and just 3 blocks to the all the retail and restaurants of Phinney Ridge – Red Mill Burgers, Starbucks, Ken’s Market, Greenwood Hardware, Umpqua Bank, and so many more local small businesses. Plus you’re just blocks from the Phinney Neighborhood Association which hosts the Farmer’s Market, numerous community building events, classes, a pre-school, and much more.
This home, at 736 N. 70th St., offers 3 bedrooms on the upper floor, 1.75 bathrooms, an additional room on the main that could be a 4th bedroom, family room, or home office. Southern exposure brings you lots of natural light, with a peek-a-boo view of Mt. Rainier from upstairs. A level, grassy, fully fenced backyard is perfect for your pooch to run around in, as well as for summer barbecues, croquet, and all-around fun. On the lower level you even have a working sauna in which to unwind at the end of the day.
Check out the home online, download the home flyer, or give me a call at 206-790-0081 or an email for more information or a private showing. List price: $549,000 and offers will be reviewed on June 13, 2014.