Seattle Housing Buzz

Today several members of the industry testified before the Senate Appropriations sub-committee on Transportation, Housing and Urban Development. Lennox Scott, CEO of John L. Scott Real Estate, testified on behalf on NAR’s proposal for FHA enhancements to streamline the agency and incentives to spur homeownership.

According the Scott, FHA’s volume has increased four-fold since 2007 and now has a 30% market share. To facilitate FHA’s capacity to handle business and provide more loans, NAR has proposed the following improvements to FHA:

1. Increase funding for staffing and technology enhancements. FHA currently has about 900 on staff. With its substantial growth NAR estimates that FHA is understaff by about 160 positions. FHA’s current systems on average are 18 years old and NAR recommends that FHA upgrades its systems such as replacing the 30-year old legacy-based COBOL mainframe systems with web-based applications.
2. Monetize the $8,000 first-time homebuyers tax credit to make it available for use at closing through a collateralized loan against the tax credit. This would allow buyers to use the credit towards a down payment. NAR estimates this could incent up to 500,000 first-time home buyers into the market place, particularly when combined with FHA’s low 3.5% down payment requirement.
3. Make the higher loan limits permanent in order to provide stability in the market. Currently, the temporary loan limit for King, Pierce and Snohomish counties is $567,500.
4. Ease financing for condominium purchases through reducing the owner occupancy percentage and removing the environmental review requirement. NAR recommends reducing the 51% owner-occupancy ratio for all condo developments, thus allowing more condo buyers access to FHA financing. Additionally, removal of the environmental review will help streamline the approval process. NAR recommends that FHA accept state and local environmental review findings in lieu of a federal review.

Of the four proposed improvements the one that’ll have the most direct impact for consumers is making the $8,000 tax credit available at the time of purchase. Though this would only apply to FHA loans, FHA is becoming one of the most prevalent loan options for first-time homebuyers.

Tags: , $8000 Tax Credit, FHA, First Time Homebuyers Tax Credit

President Obama’s $75 billion Homeowner Affordability and Stability Plan is intended help struggling homeowners by providing incentives to lenders, servicers, mortgage holders and borrowers to help modify mortgage loans.

More on the plan:

Wall Street Journal Blog: FAQ: Who Qualifies for Housing Bailout?

Washington Post: How the Program Would Work

CNN Money: Mortgage help: Do you qualify?

Bloomberg: Mortgage Plan Effect May Be Limited, Analysts Say

US News: The Obama Housing Fix: 5 Things to Know

ABC News: Obama’s Housing Rescue Plan Will Slow Home Value Slide as Early as March

CBS News: Who’s Eligible For Obama’s Mortgage Plan?

US Today: Millions could get help, but is foreclosure plan fair?

Time: Will President Obama’s New Housing Plan Work?

Tags: Foreclosure plan, Homeowner Affordability and Stability Plan

Passed by both houses of Congress and expected to be signed by the president, The $787 billion American Recovery and Reinvestment Act of 2009 (aka stimulus bill) has several provisions aimed towards real estate and housing. Here’s a brief overview.

Tax Credit
The bill includes several modifications to the current $7,500 first-time homebuyers credit, which includes:

• Increases the credit to $8,000.
• Removes the pay back requirement, previously it was a 15 year zero interest loan.
• Has a recapture component if the home is resold within three years
• Is retroactive to January 1, 2009 and extends through November 30, 2009.

Tax payers who purchase a home this year can apply the credit to their 2008 tax return.

Comparison chart of the existing tax credit and the new $8,000 tax credit.

Higher Loan Limits
Another provision of the bill reinstates the higher loan limits that were available last year for FHA, Fannie Mae and Freddie Mac. For King, Pierce and Snohomish counties the loan limit is expected to increase to its 2008 level of $567,500.

Neighborhood stabilization
The bill provides for an additional $2 billion for the Neighborhood Stabilization Program. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. The homes are to be used to assist people earning less than 120% of the area median income.

Energy efficiency credits

• Through 2010, homeowners who make energy efficient improvements (purchase of a new furnace, windows and insulation) can claim a 30% tax credit (up from 10%) with a $1,500 cap.
• $5 billion weatherization assistance for low-income households.
• $2 billion for Section 8 efficiency efforts.

Tags: , $8000 Tax Credit, American Recovery and Reinvestment Act of 2009, First Time Homebuyers Tax Credit, Tax Credit

Thanks to hard work from industry stakeholders, including the Washington REALTORS® organization, the Department of Revenue reversed an earlier decision to apply the state’s real estate excise tax to debt forgiven through short sales. Read the DOR’s statement here (PDF).

If you’ve paid the excise tax on a short sale forgiven debt, you can request a refund from the DOR. DOR Refund form (PDF).

Tags: Real Estate Excise Tax, Short Sales, Washington Realtors

Last week the state legislature overwhelming approved bill 2778 reforming the licensure of real estate agents. The bill now heads to the governor’s desk for signing. The bill, which strengthens consumer protections and professional accountability, received widespread support within the industry.

The core reforms include:

• Elimination of the real estate salesperson classification, leaving broker, managing broker and designated broker classifications.
• Amends the licensing and educational requirements for brokers to 90 hours. Essentially, the “new” broker designation replaces the “salesperson” classification which only required 60 clock-hours of education.
• Implements greater oversight of licensees.
• Requires a background check by the Washington State Patrol.

Once signed by the governor the bill will become effective July 1, 2010.

Personally, I’m all for this bill even though it should be tougher. There is a definite need to increase the educational and licensing requirements of real estate professionals in Washington State. The changes will help to assure consumers that individuals practicing real estate are qualified, above board, full-time business persons. It’ll eliminate the plethora of agents who aren’t committed to improving their own skill sets or who treat real estate as a hobby or second job.

Tags: Housing Legislation, Real Estate Legislation, Real Estate Licensing, Seattle Real Estate

1. Condo Conversion Bill, Senate Bill 6411

Per the Senate’s listserv notification I received, the February 5th Public Meeting on the bill was cancelled. It is not currently on the agenda for this coming week.

2. Reserve Accounts & Studies for Condominiums, House Subsitute Bill 2541, Senate Bill 6215

Authorizes condominium associations to conduct reserve studies and to establish a reserve fund. The bills have passed their respective houses and now move to the opposite house for consideration. A public hearing of the Senate’s version will be heard in the House on February 20th while a public hearing of the House’s version will be heard in the Senate on February 21st.

House Subsitute version summary:

• Requires a residential condominium association, unless doing so would impose an unreasonable hardship, to (1) prepare an initial reserve study based upon a visual site inspection conducted by a reserve study professional; (2) update the study annually; and (3) arrange for a visual site inspection every three years by a reserve study professional.
• Encourages, but does not require, a residential condominium association to establish a reserve account, supplemental to the association’s annual operating budget, to fund major maintenance, repair, and replacement of common elements.
• Requires a condominium public offering statement or resale certificate to include (1) a copy of the current reserve study, or (2) a disclosure to the potential buyer stating that the association does not have a reserve study.

Senate version summary:

• Condominium associations (association) are encouraged to establish a reserve fund account to pay for major repairs or replacement of common elements. An association may withdraw funds from the reserve account for unforeseen expenses, as long as notice is given to unit owners, and a repayment schedule is set up.
• Associations must conduct and update reserve studies annually. The initial study and the study done each third-year thereafter must be conducted by a reserve study professional. Reserve studies must include detailed information on projected expenditures and current reserve account information.
• If an association has not conducted a reserve study prepared by a professional in the past three years, one may be demanded if 20 percent or more of the unit owners agree. An association may refuse the demand if conducting the study would impose an unreasonable economic hardship on the association. An unreasonable hardship exists if preparing the study would cost more than 10 percent of the association’s annual budget.
• Public offering statements and seller’s disclosures must include either: (1) a copy of the association’s current reserve study; or (2) a disclosure informing the buyer that there is no current reserve study and the possible risks that the buyer faces because of the lack of a current study.

3. Seller’s Disclosure Statement Revision, House Bill 2894

The bill amends the Seller’s Disclosure Statement, Form 17, to include wood burning appliances. The bill passed the House and has moved to the Senate. A public hearing as been scheduled in the Senate on February 22nd.

Tags: Condo Conversion, Condo Reserve Study, Housing Legislation, Real Estate Legislation, Seller Disclosure Form

The Seattle PI reported that Governor Gregoire signed into law a $1.5 million bill that’ll provide counseling to at-risk homeowners.

The money will go to agencies that counsel people facing foreclosures, as the governor tries to curtail effects of the mortgage loan crisis hitting the nation and the state. The bill signed Monday also will pay for a free number for people to call for help. The number, 1-877-894-HOME, will be operating in about two weeks.

Tags: Foreclosure, Foreclosure Counseling

This morning the State House convened to review the condo conversion bill (HB 2014) which passed its third reading by a vote of 94 to 1. The House version of the bill:

• Extends the notification period from 90 days to 120 days.
• Authorizes a city or county government to require developers to provide relocation assistance to low-income tenants in an amount to be determined by the city or county government. Currently, the state requires a $500 relocation assistance payment to low-income tenants.
• Prohibits construction within the 120 day notification. Though, construction may begin earlier provided the developer waits at least 12 hours after the last tenant vacates.
• Authorizes cities & counties to restrict the number of conversions.

On the other side of the aisle the State Senate will hold a public hearing on Tuesday, February 5th at 1:30 PM at 1:30 PM on January 22nd. The senate’s version (SB6411):

• Extends the notification period from 90 days to 180 days.
• Provides that notice of any county or city relocation assistance programs must be expressly stated to tenants.
• Requires developers to pay relocation assistance in an amount determined by city or county ordinance.
• Provides that the amount of relocation assistance may be adjusted annually.
• Allow developers to begin limited construction/remodeling within the 180 day notification period only if all tenants have vacated or if they provide written waivers to the developer.
• Authorizes cities & counties to restrict the number of conversions.

I have been in favor of some sort of change to the current requirements - 90 days notice and $500 towards low-income tenants - which is hardly anything. The cost to move and secure a new place to live is considerably more than $500. And, if you’re not low-income, you get nothing. But, I’m a little skeptical about placing limits on conversions. I’m a firm believer that the market will self-correct and adjust accordingly. And, it has.

1. “Repartmenting”

In the past six months, the slowing condo market has taken its toll in Seattle. At least three heavily promoted conversion projects have reverted, or repartmented, back to apartments. These include the Max in Greenwood as well as the Strata and Gables in West Seattle.

2. Repurposing

Another trend that we’re now seeing in Seattle is the repurposing of condominium projects to apartments. The most recent example was Expo62 in lower Queen Anne. However, it wasn’t the only one. The Landes on First Hill and the Chloe on Capitol Hill, both originally planned as condos, will be developed at apartments.

Also, there is speculation that more are on the way such as the recent announcement that the Domaine project on Queen Anne is currently up for sale as an apartment complex.

3. Constructing

Often overlooked is the new apartment boom that’s occurring in the Emerald City. Several high-rise apartment buildings are presently under construction or in development in downtown. These include The Olivian at 8th and Olive, Kinects on Minor at Stewart, the Aspira at Stewart & Terry as well as three additional high-rises on 2nd & Virginia and 3rd & Virginia, a twin-tower development at 6th & Lenora, and the massive 500+ unit 1200 Stewart project.

A number of smaller apartment projects are under construction around the Seattle Center including The Borealis (Denny & Dexter), Taylor 28 (Taylor & Denny) and the Bernard (Warren & John).

In the north end, The Tyee is currently under construction across from Green Lake, which joins the large apartment projects planned for the old Vitamilk (The Park 71) and Albertson’s (Alexan Green Lake) lots. And, in Greenwood, the old Leilani Lanes parcel is expected to be developed as apartments as well.

Capitol Hill will also see new rental inventory with the Packard (12th & Pine), The Pearl (15th & Madison) and the Agnes Lofts (12th & Pike). Additionally, two large apartment projects are planned on Broadway at Pine Street and the old QFC lot.

4. Fundless
The mortgage meltown and the evolving housing market have combined to dry up funding for conversions. Many developers, as reported by the Daily Journal of Commerce, are finding it difficult to obtain financing for conversions. Lenders are realizing that conversions are now too risky to fund. The heyday of mass conversions that we’ve experienced between 2005 and 2007 has passed.

The heart of the bills are necessary, namely the parts that softens the stress of displacement and provides relocation assistance for tenants. Though, artificially constricting conversions, which provide first-time homeownership opportunities, on the basis of a declining rental stock is simply unnecessary. Clearly, the market has adjusted as witnessed by the more than 1,000+ new apartment homes being built. The new apartments aren’t just for the wealthy, either. A number of projects are aimed towards the affordable apartment housing market.

Tags: Apartments, Condo Conversion, Seattle, Seattle Condos

The condo conversion bill that was given a last chance two weeks ago in the Senate has finally met its end…at least for this legislative session. Supporters of the bill, including both the Senate and House, should use the off season to plan a concerted effort for the next legislative session.

Related SHB Articles:

• Condo Conversion Bill Reprieve
• Compromise Be Damned
• Condo Conversion Makeover

What seemed dead a few weeks ago is being given a second chance. The Senate has attached the condo conversion bill to another affordable housing measure. If passed, it will go into House-Senate reconciliation as the House’s version of the affordable housing measure does not include the conversion bill.

However, the Senate’s version of the the condo conversion bill (SB 5031) is far more restrictive than the earlier compromised bill in the House (SHB 2014). Under the Senate’s bill:

• Eliminates the $500 cap on relocation assistance, allowing municipalities to set their own limits
• Requires a 120 day notice to tenants (currently 90 days)
• Developers many not begin construction during the 120 notice period or until the last tenant moves out

The bill does not include a conversion cap which the bill’s sponsor and tenant advocates were pushing for.

I, for one, am relieved the conversion cap was not included. You don’t fix one issue (tenant displacement) by hampering another (reducing the availability of affordable housing with a cap). Conversions, as a whole, have provided many first-time buyers the opportunity for homeownership. This is a good thing.

Now, I don’t work with conversion developers, but the restriction on construction seems draconian. I can understand it adds to the stress of the current tenants but it only serves to ultimately impact the cost of the conversion, and thus, increasing the sales price for buyers, many of whom are first-time homebuyers.

I’m not unsympathetic to tenants. In fact, I applaud the legislature in taking action. I’ve been a tenant far longer than I’ve been a homeowner.

I was displaced by a landlord who only gave me one-month’s rent worth of relocation assistance (he sold the property). Not enough to cover the costs of moving and acquiring another rental. I also lived in an apartment that was converted to condos. These things are part of life. And, that provided me the impetus to take matters into my own hands and become a homeowner.

Though, there is a need to help those who don’t have many options. Increasing the relocation assistance amount as well as helping tenants relocate, I think, are more useful remedies than placing a cap on conversions or limiting developers from beginning construction work.