Seattle Housing Buzz

Just taking a little poll to see if anyone uses Realtor.com to search for properties.

Thanks.

From The Seattle PI -

Housing prices, slumping after a five-year boom, are projected to decline in more than 100 of the nation’s metropolitan areas, with the Northeast, Florida and California among the areas hardest hit.

The forecast by Moody’s Economy.com, a private research firm, presents one of the starkest views yet of the housing slowdown that has been gathering force in recent months.

Nothing said about Seattle but I suspect we’ll see continued softening of the market place and price reductions on overzealously priced properties. Don’t think they’ll be a crash but will likely see value corrections and more stable inventory as assorbtion rates continue to rise.

The Seattle PI reported on the growing trend of having a pre-offer inspection, or preinspection as it’s commonly referred to.

Inspectors and real-estate agents say that — at least for desirable homes in Seattle’s more sought-after neighborhoods — purchase offers “subject to inspection” may become as outmoded as offers contingent on the sale of another house. Instead, would-be buyers are paying for inspections before making a bid on the house as is, or forgoing inspections altogether.

Whether to have a preinspection is really dependent on the market. As the market soften and competition for in-city homes loosen, the value of a preinspection diminishes.

Seattle, though, is comprised of a number of micro-markets - there are differences, for example, between Queen Anne or Westwood, Wallingford vs Crown Hill, or Ballard and Lake City. Homes in neighborhoods surrounding the city core (Queen Anne, Capitol Hill, Ballard, Fremont, Wallingford, Green Lake, et al) are still in demand by buyers, not only for their proximity to the city center but also due to the style of homes found in these established neighbhorhoods, and in some cases, affordability.

It is beneficial, though not a necessity, for buyers to consider preinpection in the hotter micro-markets. It certainly helps from a competitive standpoint, as a preinspected buyer will likely present a stronger offer without having a post-offer inspection contingency. Also, in the close-in neighborhoods, the homes are predominately older, possibly hiding surprises. Conversely, in cooler micro-markets, it might not be a consideration at all.

NOTE: Since this post was originally written, many of the forms have since been revised. The information contained below may no longer be accurate.

This Summer the NWMLS revised a number of the forms commonly used in the purchase and sale of residential property (single family homes, condos & townhomes). Listed below is a synopsis of those changes. Whether you’re a seller or a buyer, it’s important to understand how these changes can affect you. This article only highlights the changes and is not meant to convey & explain the complete set of revisions.

Seller Disclosure Statement (Form 17)
Revision of farming disclosure. In the previous update the form incorporated a question where the seller had to indicate whether there was a “farm” within a one mile radius of the property. There was ambiguity as to what consistuted a farm, thus potentially creating undue exposure on part of the seller. The current revision simply states that the property may lie in close proximity to a farm. It no longer requires to Seller to actively acknowledge the existence of a farm.

Residential Purchase & Sale Agreement (Form 21)

Possession Date:

• Eliminated a possession option on the contract allowing for possession to occur after closing. Contracts now default to possession at closing, though other alternatives may be agreed to. A possession date may fall on a weekend or holiday.

Computation of time:

• Clarifies that time is expressed in days, not hours. In respects to the contract, 24 hours does not equal 1 day. Time starts by counting the next day. Time periods end at 9:00PM unless otherwise specified.
• If a specific date is entered, that date will apply even if it’s a weekend or holiday.
• For time periods of 5 days or less, business days are counted. For more than 5 days, calendar days apply.
• If the last day falls on a weekend or holiday, it is not counted, except for the Possession Date.

Legal Description:

• A legal description must be attached as an Exhibit at the time of the offer for the contract to be valid. If not attached, the contract is considered illusory and not binding.

Assignment:

• The Purchase and Sale contract prohibits assignment to another party without written consent of the seller. However, at the time of offer, the parties may include “and/or assigns” on the first page of the agreement.

Financing Addendum (Form 22A)

• Buyers must disclose type of loan they are obtaining including whether the loan is a Second or Bridge.
• Clarifies that the downpayment is in addition to all sources of financing.
• The Contingency runs from Mutual Acceptance or Satisfaction of Form 22B.
• Buyer must either waive or provide a letter of loan commitment within 30 days; obligation to provide the letter is automatic. Unless waived, the Contingency remains active.
• If the Buyer does not provide the loan commitment letter, the Seller may provide a 3-day termination notice or allow the deal to continue.

Buyers Home Contigency Addendum (Form 22B)
The revisions clarify that:

• Sellers must accept the bump offer before giving the bump notice.
• Satisfaction is something much different than waiver and with different ramifications
• By waiving Form 22B, Buyer waives all other contingencies including Financing and Home Inspection

Inspection Addendum (Form 35)
Previously, the NWMLS supported two differently Home Inspection Addendums. The former Form 35A allowed for the Buyer to back out of the contract simply by disapproving the Inspection report. The former Form 35B allowed the Seller the opportunity to make repairs on items which the Buyer disapproved of. Both, Forms 35A and 35B, have been discontinued and replaced with Form 35.

• The new Form 35 closely resembles the former Form 35A, providing the Buyers the right of termination by disapproving, albeit subjectively, the Inspection report. This allows the buyer to essentially walk away from the deal.
• The Buyer has 10 days to inspect and may (1) approve and waive the contingency, (2) disapprove and terminate the contract, (3) request additional inspections or (4) propose modifications. If the Buyer does nothing, the contingency is automatically waived.
• Removed provisions for Deferred Deposit of Earnest Money and the Neighborhood Review (now separate form).

Today’s Seattle Times Real Estate section’s feature article is titled “Real Estate: Sellers, buyers should make sure they’re comfortable with the agent.” The gist of the article is to impart on readers the need to evaluate and choose their agents carefully:

Many people have heard a horror story about a bad real-estate agent: a young agent who butchers a deal because of poor negotiating skills; an agent who lies to prospective buyers about a home’s leaky roof; or one who pressures clients into buying a home they can’t afford.

Bad agents may be few and far between, but prospective buyers and sellers should take steps to ensure that they get one of the good agents and one they feel comfortable working with.

Membership in the National Association of Realtors has jumped 44 percent since 2003, from 876,195 to 1.26 million, the Washington, D.C.-based group said.

That means there are a lot of fairly new agents and even more reason to be picky, said D’Ann Jackson, president of the Seattle-King County Association of Realtors

Of course the part that was of particular interest:

Seattle-area John L. Scott agent Ben Kakimoto, who volunteers at the Seattle Animal Shelter at Interbay, donates a portion of his commission to the Seattle Animal Shelter or to a charity of his clients’ choice.

In looking at the price ranges for the 49 proposed downtown area condo projects, one wonders where are the people coming from that can afford them. Most start at $500,000 and go upwards to more than $10 million. These homes certainly aren’t for the working middle-class. Developers are banking on empty nesters who don’t need their large homes cashing out their equity and moving into maintenance free living, urbanites who enjoy city life or work in the city, and those fleeing the suburbs.

And, of course, there’s just simply lots of millionaires. June Fletcher wrote in her Wall Street Journal’s House Talk column:

According to the latest World Wealth Report, issued by money managers Merrill Lynch and Capgemini Group, 2.67 million Americans — roughly 1 in 100 — has a net worth of more than $1 million, excluding their primary residence. That number is up 6.8% from the year before. World-wide, the ranks of the super-rich with assets of $30 million or more grew even faster, up 10.2% to 85,400. Yet not everyone who owns a million-dollar home makes seven-figure salaries. A 2005 Coldwell Banker Previews survey of 300 homeowners whose primary residence is valued at more than $1 million found 57% of households earn less than $500,000 a year.

Over the past few years, low interest rates and those questionable interest-only loans allowed many homeowners to stretch beyond what they normally would have been able to afford. But it’s not just easy credit that allowed the merely affluent to enter the millionaire homeowner’s club — it was also rapid equity build up.

I fit among the urbanites wanting to live in the city, but I’m not a millionaire (yet). I used to live in the city before I bought a home in a quiet neighborhood in north Seattle. It’s a different lifestyle and I now know that urban living suites me better - having everything close by and within walking distance - work, shopping, restaurants, entertainment, etc. But, I do like gardening so that’ll be a trade off, though Belltown does have a P-Patch and The Martin project will have a P-Patch on the roof.

Higher prices and higher rates are putting the squeeze on first time homebuyers and Seattle’s housing market is no exception. CNNMoney.com recently profiled this issue and provided some advice as well.

What a difference a year makes when you’re in the market for a new home, especially if you’re a first-time buyer.

Thanks to a combined jump in mortgage interest rates and home prices, a starter home in many areas of the country could cost you several hundred dollars more per month today than if you bought it last year.

Nationwide, median home prices rose at annual rate of more than 10 percent in the first quarter of 2006, according to the National Association of Realtors.

Meanwhile, rates on adjustable rate mortgages, the most common for first-time buyers, are up more than a percentage point.

According the WSU’s Center for Real Estate Research the Housing Affordability Index for King County is 80%. That means the typical family only has 80% of the income to purchase a median-priced home. For 1st time buyers in King County, it’s even lower at 44.7%. Less than 1/2 of 1st time buyers can afford a home in King County. ¹

1 Washington State University - “Washington Home Sales Stabilize While Affordability Sags”.

Nothing new this week, but I did post an article on pre-construction investing at the Seattle Condos and Lofts blog. Take a look at it and let me know what you think.

Vulcan and John L. Scott finally issued their official press release this week about John L. Scott handling sales for Vulcan’s current projects - Veer Lofts, Enso, The Martin and Rollin Street Flats. Not quite sure why it took so long considering it was included in the information packets Vulcan handed out at their preview event back on June 17th.

Coldwell Banker Bain introduced a near indentical search function as John L. Scott (same developer). One thing I like about theirs it that users can filter by # of cars and # of stories.

Been playing the points game at ActiveRain and I’ve fallen to third featured agent in Washington. Another JLS agent is listed as the #1 featured agent in Washington, mostly because of some fluffy blog postings.

This past weekend was the annual Seattle LGBT Pride Parade. For the first time in the event’s history, it was moved to downtown Seattle. The route on 4th Avenue went from the Westlake Center to the Seattle Center, passing right in front our office on 4th Avenue where we threw a party for clients and neighbors. An estimated 200,000 people lined the streets and attended the festival at the Seattle Center. This was also the first year that John L. Scott hosted a booth at the festival, joining Prudential, C21 & Wells Fargo.

Most of us know about Google. And, most of us who know about Google know about Google Labs. Some of the programs they’re working on are nifty such as Google Maps. But, most are gimmicky and aren’t really useful. To be fare, these are side projects for many of the developers who work on the programs on their spare time.

Zillow has now entered the playground with Zillow Labs. The Lab has three toys to play with - a Zillow Search button for the Google Toolbar, a search add-on for Firefox, and Zillow search box to plop into websites. I’m not so sure these are quite the “cutting-edge projects” that Zillow Labs say they are.

The first two, to me, fall into the gimmick category and just clutters the Google Toolbar and Firefox. I’m wondering who would actually use it and when. Sellers don’t sell homes regularly so I’m wondering if they would even install these programs. It’s not like their home’s value is going to change daily. Internet-savvy buyers would find more value in that they can look at what the Zestimates are for the properties they’re interested in. But once they make their purchase, I’m guessing many won’t uninstall it leaving another application cluttering their browser.

The third, well, I’m not sure who it’s intended for. As an agent, I wouldn’t incorporate it. Nevermind that Zestimates are often criticized, but why would I send my clients to Zillow? Besides, I think I can perform a much more thorough analysis. True, Zillow’s info is immediate, generally within range and people do need to wait for me to complete my analysis, but I tend to think my results are more credible and comes with a personal touch to boot.

Oops, I just tried it…

We could not find the home you requested. The map is showing the general area you requested.

Last night at the Benaroya Hall was the inaugural Downtown Seattle Realtor Symposium + New Construction Condo Showcase. Sponsored/organized primarily by Urban Condominiums and Realogics, the event featured presentations & panel discussions by representatives the Seattle Times, Windermere Onsite, HomeStone Mortgage, Weber+Thomson, Downtown Seattle Association, The Justen Company, Gardner-Johnson and a few others. The Seattle-PI wrote an article about the event titled Booming development set to change Seattle’s look.

The reception featuring free wine and appetizers by Wolfgang Puck, provided Realtors, investors, developers and media an opportunity to mingle and view models of the various downtown projects including a 3-D model of downtown showing where the new projects will be located (similar to Vulcan’s South Lake Union model).

The Condo Showcase presentation was a bit bland in that very little information about the new projects were provided. Mainly, they just mentioned the expected construction and occupancy dates, location and number of units. Some of the speakers detailed design and building features. Most were tight-lipped or simply stated…”go to our website”. For such a hyped event, it was a bit anti-climactic.

There were bright spots and I found some of the speakers and topics about the future housing market for the downtown area fascinating. Keep in mind, the presenters are from the real estate, building, financing and marketing industries so naturally the view points may be a tad biased.

Where to Build?

A vast majority of the future projects will be constucted in the Midtown and Denny Triangle areas north of the downtown core. Available land and changes to the city’s zoning make the northend attractive to developers. Realogics and Weber+Thomson presented a nifty 3-D animation of the area and the Seattle-PI posted it on their website (note, it’s a large PDF file).

In the Year 2010

One speaker I found to be the most objective and knowledgeable was Matthew Gardner of Gardner-Johnson. Mr. Gardner whose background is economics, discussed the future housing outlook for the downtown areas and interest rates. By 2010 most development experts are asserting nearly 10,000 new housing units will be built in the downtown, Midtown, Belltown and Denny Triangle areas. Gardner provided a more realistic number of approximately 6,500 to 6,800 units will be added, noting there are forces that may constrict construction. These forces include rising labor and land costs, consumption of building materials (post-Katrina rebuilding and China’s rise) and lack of available labor and cranes. Apparently, there is a finite number of cranes and Seattle is in short supply.

Gardner touched on the “bubble” topic as well. He mentioned that Seattle should be able to absorb about 2,000 to 2,400 new units per year, but with the external factors noted above, housing supply will be constrained with only about 1,500 units available per year for the next 4-5 years. This combined with job growth and decrease of short term interest rates that’ll reduce rates on 3 and 5 year ARMS, Gardner predicts the downtown housing market will remain strong.

(On the job market, there are some shifting already going on, that will increase workers in the downtown core. Washington Mutual is completing it’s new office tower (retaining employees in downtown), Starbucks is building a new facility, and Safeco is relocating over 1,000 employees from the U-District & Eastide to downtown. Also, Amgen is adding 550,000 sq ft to it’s Pier 89 site potentially doubling it’s workforce).

Mortgage Rates - Where art thou going?

Another interesting speaker was Keith Tibbles of HomeStone Mortgage. Tibbles mentioned that on June 28th the Federal Reserve Interest Rate is likely to rise another .25% to 5.25%. Which, theoretically doesn’t bode well for housing sales. He did explain that the past 4 Fed cycles lasted 9 months each and at the end of those cycles, mortgage rates were cut. He suggested we are now overdue for a mortgage rate adjustment.

He also spoke about the yield curve inversion, stating that when long-term interest drops below the short-term rate, the economy tends to slow down, thus sparking the Feds to adjust rates to stimulate the economy. This writer doesn’t know very much about yield curve inversion, but a brief tour of Google suggests this is an oft debated topic.