The Devolution Of The FHA Home Mortgage Loan

“I Thought Getting An FHA Loan Was Easy? Doesn’t The Government Like Me Any More?”

The Next Mortgage Banking 'House Of Straw!'

 

Are you in a home purchase transaction right now? Are you a Buyer, seller, or an agent involved in the sale? 
 
          Are you pulling your hair out?
 
        Here's what's going on in the world of home finance using FHA loans…..
 
Let's start with the basics of FHA.
 
        An FHA loan is a loan with more relaxed credit requirements and a smaller down payment requirement than most other loan programs (VA and USDA are similar) on the market.
 
        FHA stands for Federal Housing Administration and the loans offered through FHA have been around for decades, but only recently (last two years) have they become popular again.
 
Why the Rebirth Of FHA Lending?
 
        Because other than VA and the ultra-rare USDA loan, it's the only loan not requiring at least 10% down and great credit! Remember those NO DOC and basically silly FREE loans of ‘not so long ago?’
 
(and yes, it's the same USDA that grades the beef you buy, but I'll talk about USDA loans at another time – Gotta be in the right mood for this stuff!)
 
        FHA loans are loans that are issued by a typical bank, but insured (not made by, but insured by) the government against default.
 
        I repeat, the government DOES NOT MAKE THE LOANS, they only insure them against loss.
        In essence, to promote home ownership, the government encourages private banks to make home loans to folks under easier terms than the rest of the market might allow, and promises the bank that the government will step in and make whole any bank that offers the FHA loan where the borrowers default (cease making timely payments).
 
        The government makes these bail-out payments to the bank using a pool of funds that is replenished each time a borrower takes out a new FHA loan (that's what the FHA Funding Fee is for) and each time a borrower makes a payment on an existing FHA loan (that's what the monthly Private Mortgage Insurance payments are for).
 
        The FHA loan presently allows for:
·         A small 3.5% down payment
·         Offers very competitive rates and…
·         Is easier on qualifications like credit score or employment history than traditional loans have become (I say "become" because-again- remember dead people could take out unaffordable loans in the recent past. Or near death - Hence the ‘Fog the Mirror’ loan.)
 
        It's pretty tempting to buy that $400,000 home using an FHA loan which requires only $14,000 down instead of a more conventional loan that requires $40,000 down; so many folks with strong credit have used the program, to keep more of their savings in the bank. Makes sense to me!
 
 
FHA Is Suddenly En Vogue!
 
        So now the FHA loan program has gone from moth balls to concert halls in about two years, and the volume has really stressed the program, which once really only served a fairly small sliver of homebuyers.
 
This is where the story gets interesting!
 
        You see, in order for the government to insure FHA loans, they require that certain, lengthy, detailed, often silly or duplicative requirements be met, and that's the present source of the widespread frustration with FHA lending. The "red tape" just got thicker and stickier…
 
        Consider this: FHA was not popular until recently because until 2007 or so, there were several programs that catered to borrowers with troubled credit or little down payment that did so faster and more easily than the government-sponsored program.
 
        The notion of FREE or almost FREE Bank money has always been popular, naturally, but always a seriously flawed fantasy. Banks don’t do anything for FREE!
 
        Known affectionately (and maybe wistfully) as "Sub-Prime" and "Alt-A" in the banking industry, these loans were fast and easy to get, so for a few years FHA volume nearly flat lined, and most loan originators, underwriters, and lending banks forgot how to do them, or never learned to begin with. No ^%##@!!
 
        I'm serious. Really!
 
        The volume of paperwork and detail for an FHA loan was so high in comparison to the fast money of the early 2000' s that there was no incentive to use the program. "FH-What?"
 
 
"Quality-shmality. As long as I'm rich"
 
        In the heyday, no one looked too hard at loan documentation quality because all homes were rising in value and everyone was having a good time.
 
Then,…KA_BLAM!
 
        Since the death of sub-prime however, the market pendulum has swung hard in the other direction, with loan quality now a top concern and making lending a very detail-centric experience, compelling at least one financial reporter compare getting a mortgage to a “financial colonoscopy" (http://online.wsj.com/article/SB124277960359137325.html)
 
        Credit quality is the newfound religion on Wall Street and in the world of debt investors (people who buy mortgages and other "promise-to-pay" instruments, like corporate and municipal bonds,…etc), and originators (those are the people who actually take the application and get paid the commission (which has shrunk dramatically I might add)) with spotty records or low volume are being dropped or disqualified from FHA.
 
        It's true…many loan professionals don't even qualify to do FHA loans now. 
       
How Things Change!
 
        FHA was never designed to be used as heavily as it is now (6,000 FHA mortgages every day!), and what's worse, the credit quality of past FHA loans is under the microscope now because many FHA loans done recently are already in default. 
 
        That's right…FHA loans are defaulting at an alarming rate, scaring the crap out of bankers, investors, and government officials and making them pull harder on the purse strings.
       
        Thanks to the Meat Heads who didn’t get the lessons of the last 3 years!
 
          I certainly am not referring to those people who are still being churned and sucked under the wheels of this mortgage lending tragedy – this perversion of lending.
 
 
 
 
 
        It seems that FHA is in trouble and defaults are getting out of control, and some are indicating that unless quality controls are improved ANOTHER bailout for the mortgage industry is coming, but this time for the government itself.
 
Be Afraid – Be Very Afraid!
 
        This growing wave of defaults means banks that did FHA loans are standing in line at the FHA window with their hands out, expecting FHA to make good on its promise to make the banks whole. 
 
        Hard to feel sorry for banks but I kind of do in this case.
 
“A funny thing happened to me on my way…”
 
        But a funny thing has been happening lately…well, maybe not funny at all. The FHA is looking at the loan packages associated with these defaulting FHA loans and noticing that little things were not done correctly, (usually of a clerical nature, such as not properly documenting the movement of funds within a borrower's accounts, or not dating correctly the signed borrower disclosures,…little things like that) AND THEY ARE DENYING TO INSURE THE LOANS on that basis.
 
Can you say "Mad Banker?”
 
        Staplers, paperclip holders, and stupid desk toys are flying around executive offices all over America amidst shouting CEO's and crying secretaries (and ashen-faced Quality Control Officers).
 
        Banks that were relatively new or rusty at putting together FHA loans in 2007 and 2008 are being sent to back of the line when they expected to collect restitution payments from the Feds for defaulted loans. Nothing gets a banker in lather faster than telling him (or her) that "the check IS NOT in the mail."
 
        Let me state that again, because it's the main reason for FHA loan woes: for clerical and documentation deficiencies in the loan files themselves (where the entire collection of the borrower's documentation is stored) banks are having to eat loans they thought they were insured for. 
 
        I would joke maliciously here but it’s serious enough not to.
 
        If you're a smaller bank that lends maybe $100m each month in FHA loans, and sells all $100m of those FHA loans to investors (so you can re-lend that $100m every month, making money on the turning of the loans, not the keeping of them–get it?), you're dead meat if you have to buy back from the investor the loans that the FHA was supposed to insure but didn't because you were a little sloppy or uninformed in 2008 when you did 100 FHA loans (which is a tiny number compared to FHA which does 6,000 loans every day).
 
        A loan "buy back" is what a bank experiences when the borrower defaults and the FHA wont insure the loan for some reason; the bank literally has to buy back from the investor the whole loan, plus any losses and missed payments, and then must either keep the loan on its books or else try to fix what's wrong with the loan and then sell it at the scratch and dent window for under-performing loans.
 
        Bankers HATE THAT with a passion. 
 
        As FHA is struggling with credit quality and is receiving an ever-increasing demand to insure defaulting mortgages, FHA is in turn trying to deny claims for restitution by finding little clerical errors and sending the claimant bank back to the end of the (llooongg) line.
 
Ch-ch-ch-ch-changes (in C Sharp)
 
        So banks are right now tightening up their standards, as we speak, often on the fly, and are staying up late reading the FHA bible and all the latest bulletins to see what is changing, so they can do loans that won’t come back to bite them in six or 12 or 18 months.
 
        Big banks are slower to react to the tightening FHA standards because they can absorb losses more easily than smaller banks, which have to watch every loan very closely to ensure they don't have to buy it back without warning sometime in the future. But it will happen – no doubt. Don’t be surprised when the cock sure LO who tells you ‘know problemo’ all of a sudden starts having problems getting deals done for clients.
 
        This shows up in loan files as a new demand for a tax return, or a demand for another pay stub, or a demand for the appraiser to go back out and re-inspect the home, often at the last minute.
 
        This is happening more and more now and the result is a simple loan procedure is becoming a thousand mile march through snake invested swamps!
 
        It's maddening to have new requirements show up just days before a scheduled closing, but the banks' attitude is, "Hey, we would rather not even do the loan at all rather than do it, miss some little detail, and get a buy back demand in 9 months. No thanks!"
 
        Lenders have reacted by subscribing to the same newsletters that bankers are reading with new interest, the newsletters that publish changing FHA requirements up to the minute, so they can know what the bank will want/need/demand before they ask it.
 
        I know Lenders, LO’s, are also working longer hours, annotating every page, keeping careful notes on a file, and babysitting the loan more than ever.
 
        Me included! – Remember I am a Licensed LO with Columbia Mortgage under the extremely competent watch of Ross Farr.
 
        Lenders and Brokers are re-writing loan flow process (again) to accommodate the multiple and often redundant checks on income, assets, and employment the investors are now demanding as they try to avoid future foreclosures.
 
The Nail In The Coffin!
 
        FHA is mulling further changes to credit requirements like possibly mandating a larger down-payment of 5% (up from the current 3.5%).
 
        All eyes are on the FHA program now, and some are calling it the "new sub-prime," destined to cause problems like the old sub-prime did.
 
        Anyway, I thought you should know what's happening and what is being done about it.
 
        Many of us are working our butts off to help people out there! We hope to earn and keep your business by doing the best job of getting loans done and by constantly adapting to the changing loan-scape.
 
        Don’t forget the Real Estate side of the transaction is also equally more painful than ever before.
        I suspect the waters will calm eventually, but even if they don't, we're getting pretty good at doing loans on choppy seas.
 
        Lets talk if it’s time to Buy, Sell or Refinance. (Just have lots of Pay Stubs ready!)
 
Thanks for reading.

    My Thanks and appreciation go out to Ross Farr of Columbia Mortgage and Right Start Mortgage. The Lions share of the preceeding BLOG entry was written by Ross and I am in his debt for sharing with me the true inner workings and disfunctions of the home mortgage world. I am richer in knowledge and ethics as a result of my affiliation with Columbia / Right Start Mortgage. Together we write some kick ass loans in a tough environment where the BIG Banks want to absolutely benefit from the situation they created, eliminate all Brokers and hence your rights to FULL disclosure. Dont ever let that happen! You'll never know what hit you - and thats the way the Banks want it!

 See you on the Beach!

 http://JeremyHickling.com

 

http://jch-homes.com (FREE home listings emailed daily – no agents!)
http://GoodSeattleRealEstate.com (General Real Estate Stuff!)

 

Filed under Blog, Community info, Home buying, Home selling, Local real estate news, Mortgage info, National real estate news by jeremy

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“What The Hell Happened To The Value Of My House!"

Revisit the Painful Past and Gaze into
the Foreboding Future
of Home Sales!
Earlier this evening I was reading an old news article I’ve held onto for the last few years. It’s the Real Estate section of the Tacoma Tribune dated October 7th 2006. 

There’s a little article entitled:   
 “Home Prices Still HOT, but Sales Slow.”
Little did we know, huh?
At the time, this article jumped off the pages at me and I saved it because sure enough, I was in the middle of helping a family sell their home and low and behold, it just wasn’t working out the way it was supposed to. I suspected something was up…let’s call it an intuitive sense of impending doom! – That feeling you get when you get a flat tire in a bad neighborhood at 1:00 on a Friday night and it just so happens you left your anti-tank weapon at home! (If you’re a real American you’ll understand that.) (kidding)
When you get this sense as a Realtor – if you have a conscious- it feels like a cold ball of fear in your belly. Like you really hosed the pooch on pricing this home for your customers and now the question is how do you back pedal out of this one?!
Most of us have other pet names for the unsettling period before the Media officially announced that “The Bubble Has Burst!” It was more than just the ‘The calm before the Storm’ but I try not to swear too much in my writing.
Little did we know, the house of cards was all ready tumbling and we were about to go into a free fall into Home Value Hell!
I remember doing all the usual stuff back then for my clients including locating the house that was our direct selling competition and setting our sales price at about $15,000 higher! Definitely a poor strategy these days but at the time it was a – ‘We can get anything we ask for’ world!
I’m sortof kidding but not really – I mean it was ridiculous how we could preview ridiculously priced homes with dirty laundry on the floor and Spaghettio’s all over the kitchen counters and the next day find ourselves in an escalating war between 5 or 6 Realtors!
At any rate, I couldn’t kick start the house sale for my clients and sadly it was the first and only time I’ve ever been fired! Actually I quit because I came to basically hate the house for reasons I’ll share with you if you ask but whatever happened it just wasn’t working out well – We kept adjusting our price down and the market kept adjusting it down lower!
Realtors Caught With Their Pants Down!
You’ll hear a lot of professionals talk about the 2nd quarter  
 
of 2007 as the turning point for home sales, values, Stock decline, economic Armageddon, etc, but out on the street it was obvious in August of ‘06’. A perfect storm of failures was a-brewing! 
I don’t think any of us truly foresaw the scope of what was to come. The total fiasco in the home banking industry back then was something no one knew about. I mean let’s face it – we loved those loans! Low Doc loans, No Doc loans, ‘make it up as you go along’ Loans…
Who knew that only 3 out of 10 people or couples would eventually avoid defaulting or being delinquent on their home loans? A lot of people were looking at NOD’s or Notice of Defaults on their homes.
Did anyone try to follow the good advice of their lender? Did their lenders tell them the truth about the types of loans they were buying? Did their lenders even know and understand the truth?
(Consider this folks – only since 2008 have Washington Loan Originators been required to be licensed. LO’s now actually have to have some training in practice and ethics! What a concept! For years ANYBODY could get fired from their job at McDonalds and be helping you manage a $300,000 home purchase the very next day! Trust me I saw this! Felons, Leper’s, Kid- nappers you name it.)
And if homebuyers and refinancers got the proper advice that their ARM was just a stepping stone – a tool to get to the next level so they best be prepared and follow a specific course of action to avoid repeating the experiences which required the use of ‘creative’ lending for them in the first place, do you think anyone was listening? (Rhetorical)
And how can you blame anybody? House values were doubling every 3-5 years in some places. Faster in others!
Fast forward to 2009 and now those same people who would go on to default on their home loans are now defaulting on their loan modifications. Actually the stats are a bit worse. Easily 50% - 75% of loan modifications are defaulted on within 10 months of the modification!
There’s a pattern developing -
Are People Just Stupid?
The answer is YES and NO. – Yes there are plenty of stupid people out there. Many people that you can ‘Dress up but you just can’t take em’ out!
But that’s not the point – we let stupid people become U.S. Presidents! So that doesn’t tell us anything. (I did not vote for that guy!)
Anyways, when we begin to let ourselves be drawn into fantasy’s that clearly have high risk attached I guess that makes us all a little – less then brilliant, no? (Yours truly included.)
I am a Loan Originator and a Realtor and I had several of those ARM’s – and I still like them for what they do. I also like to swim with the Sharks while others are swimming with the Dolphins so what does that tell you?
I remember PEMD, or Pre Economic Melt Down, telling people that they could just about count on their home doubling in value every 7-11 years or so in King County. That had been going on for some years depending on where you lived and we thought that was pretty damn good! And it was!
Like all good things though this housing Bliss had to end-…
…And so where does this all leave us? Pretty much just trudging the road of recession towards a future that may not be quite as bright as CNN would have us believe.
Here’s the deal – We have seen house sales increase over the past months and that is a good sign, however, we aren’t out of the woods yet. We have 8 or 9 solid months of sales momentum and this is “broad based across many parts of the country” (Ooops! CNN Sept 2009) – but lets temper this optimism with some facts.
Now, there are many plausible reasons for this healthy upswing.
·         Tax Credits (Put as much as $8,000 in your pocket for buying a home!)
·         Bank Confidence (An oxymoron if I ever saw one)
·         Low Rates (4.5% and more! WOW!)
·         Low Home Prices (Reasonable. Finally!)
All of this is good news but wait! There’s more!
The tax credit incentive may go away after this November 30th. There’s a 
 
rumor it will be extended but I wouldn’t bet the farm on it just yet! This means that if you’re not in a mutually accepted transaction right now – well, you’ll probably miss out on that one.
Bank confidence…You know, I’m convinced banks are dishonest. Personally I don’t have confidence in Banking and as a few more recent bank failures occur like California’s San Joaquin Bank this past Friday and Citizens’ Bank of Ontario (That’s California again) this past September…you know it’s not over yet!
Low Rates! We love low rates but let’s face it – they can’t stay low for ever. Do you really think Banks like to sell money to us at a 4.5% rate of return? NO! They are unhappy about this and will find ways to get back at us! Back in 1999 when I started in this industry because I was pissed off at the way my wife Jan and I were ‘handled’ in one of our early home purchases, rates were at about 8.9% or so and we thought that was great! If interest rates found their way up to 8% right now the home buying market would freeze in its tracks or at least hesitate for quite an uncomfortable while.
Low Home Prices – Probably the only factor to remain constant for a while.
Clearly there is a distinct window of opportunity right now to buy and sell a home. In fact that opportunity has been around for a while and we have people just like you and me out there taking advantage! We may lose the Tax rebate but still the opportunity’s are out there –
Consider this though. We’re returning to the ‘days of yor.’ That means where the NAR (National Association of Realtors) was predicting 20% home appreciations back in 2004 in the Seattle & King County area, (36% over 3 years average!), we are now facing the reality of moderate and constrained home appreciation more around the range of 3% - 5% annually. That is, when we actually start to see home values appreciate. That’s right around where inflation rates hang normally, 2009 being the exception.
Could be worse guys – you could be selling a Condo in Florida right now where there are something on the order of 60,000 to 70,000 units available and that doesn’t include the For Sale By Owner market.
If I can leave you with anything of value to take with you here then let’s look at selling your home the proper way.
It used to be that we would ‘look in the rear view mirror’ and gauge a home’s value by comparing to home sales over about the past 4-6 months.
Not now! Even though I still see Agents pricing homes by looking out the rear view window, most are looking out the front window – that is if you really want to sell your home in a reasonable amount of time, let’s say 90 days, then my advice is to find the home that most recently sold – the past 6-8 weeks, and also the current listing that best represents your direct competition and price below the current listing, at or below the ‘sold; comparison.
Common sense dictates that if I’m a home buyer and I find a home that has sold for ‘X’ amount of dollars, why would I be willing to spend more for the same home? Again – gentle reminder- those days are gone!
Not in this market!
Best of luck everyone– Next time we can look at home mortgage loans, how radically they’ve changed and how to shop for them!
See you on the Beach!
http://jch-homes.com (FREE home listings emailed daily – no agents!)
http://GoodSeattleRealEstate.com (General Real Estate Stuff!)

 

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Good Housing news in some Northwest MLS areas - signs of life!

Inventory shrinking, sales rising, prices stabilizing
in some Northwest MLS areas

KIRKLAND, WA, June 4, 2009 – Waiting longer to buy a home is not likely to pay off, according to Northwest Multiple Listing Service director Kathy Estey after reviewing reports summarizing May activity. Estey pointed to shrinking inventory (about 20 percent fewer listings than a year ago), double-digit increases in the number of pending sales (up 17.7 percent from a year ago), solid open house activity, and signs of stabilizing prices (eight of the 19 counties in the report show price gains since January) as indicators of an improving market.

Northwest MLS brokers notched 7,160 pending sales during May. That total out-gained the year-ago tally by 1,075 transactions (up 17.7 percent) and improved on April’s total by 242 sales for a 3.5 percent increase. For the four-county Puget Sound area, pending sales jumped 21.5 percent from a year ago, rising from 4,526 to 5,498 transactions.

Buyers had fewer choices during May than at this time a year ago. At month-end, member-brokers reported 41,318 active listings throughout the NWMLS service area. A year ago, there were 51,817 active listings. Current inventory includes 11,278 single family homes and condos that brokers added during May. For the same month a year ago, brokers added 14,176 new listings to inventory.

Estey, the managing broker at the Bellevue Downtown office of John L. Scott Real Estate, said affordable homes inventory is down to the levels of a normal market and reaching for a sellers’ market. “Multiple offers are common in the under $400,000 range when the home is priced well, shows nicely and is marketed professionally,” she remarked. “Buyers who are waiting for prices to come down more have missed the bottom,” Estey believes.

Close in markets are the most active, with rural areas still lagging, but Estey says there is now some activity where little to none had existed in the first quarter. She believes prices have adjusted and completed new construction is still a very attractive purchase. “Builder inventory is being absorbed and there are fewer incentives. In January builders were giving away the farm, by March it was only half the farm and now they may just give away a chicken or two in order to make the deal.”

Prices are showing signs of stabilizing, according to NWMLS data. Prices area-wide are down around 10 percent from twelve months ago, but a comparison to January shows price gains in eight of the 19 counties in the NWMLS report. System-wide, prices for single family homes and condominiums that closed last month are up about 2.6 percent since January. (See chart, page5.)

In King County, prices dipped about 12 percent from twelve months ago and have declined about 3.5 percent since January, but a closer look shows considerable variation within sub-areas. Prices in southeast King County fell 20 percent from a year ago, but since January are down only about 2.8 percent in north King County.

Condominium activity remains slow. Pending sales are down about 15 percent from a year ago. The median sales price of $240,000 is about 7.7 percent lower than a year ago. Condos in King County sold for a median price of $270,450 last month, which compares to the year-ago price of $287,925, a drop of about 6 percent).

Demand for high-priced homes is also tepid. According to Estey, there are “amazing opportunities for buyers with good credit scores and 25 percent down payment in the $900,000- plus marketplace.”

“What we’re currently seeing is real estate’s version of Back to the Future,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. He believes the combination of historically low interest rates, adjusted lower prices, and the $8,000 tax credit has created advantageous conditions for buyers that haven’t been seen in decades. He noted sales in the four-county area continue to see double digit increases. “The more affordable markets are seeing a major boost which is leading to higher sales in the mid-priced markets and causing some increases in activity in the upper end,” Scott remarked.

While cheered by the more vigorous activity, brokers note short sales and foreclosures continue to be a drag on the market. Such properties, often sold at deep discounts, may take extraordinary time to close once there has been mutual acceptance of an offer. (Note to editors: see explanatory note, p. .5)

NWMLS director Meribeth Hutchings, broker/owner of Windermere Real Estate/Lake Stevens Inc., said her office represents the buyer of a short sale that has been pending since October. The buyers who hope to purchase the home in Mukilteo have been very patient, but are becoming less so and are ready to move from the small apartment where they have been living with two large dogs. “Every time we think we are getting close, the lender changes what they want,” Hutchings stated.

Another NWMLS director, Pat Grimm, reported similar experiences with a short sale. “We just closed one in Montlake on May 28 — after the parties to the transaction reached mutual acceptance on Feb. 10, said Grimm, the owner/broker at Windermere Real Estate/Capitol Hill. (NWMLS defines a short sale as a transaction that does not produce sufficient funds to cover the existing monetary encumbrances against the property, closing costs, real estate commissions, and other financial requirements of closing.)

Tacoma broker Dick Beeson of Windermere/Commencement Associates said he has several agents deeply involved in handling short sales since Pierce County is so hard hit. He estimates around 25 percent of all properties for sale are either bank owned or short sale, and one of every three pending sales is one or the other.

“Short sales play a big role in what many buyers are looking for,” according to Beeson, who also noted these buyers often fail to realize the extraordinary length of time it takes to close a sale – generally twice as long as a conventional sale. “Many get discouraged after 60 or 90 days and withdraw from a sale, never having received notice form the underlying lender what they are willing to take for the property. Many properties end up going to foreclosure because of the inefficiency of the banks in providing answers to offers,” Beeson commented.

The recent uptick in pending sales, both locally and nationally, is a hopeful sign that we’re putting the worst of the market behind us, suggests Ron Sparks, managing vice president at Coldwell Banker Bain.

“As you would expect in a recovering market, not all neighborhoods are uniformly performing, and for home sellers particularly, there are plenty of challenges that remain.” However, he observed, “In many neighborhoods where just a few years ago broad affordability had all but vanished, lower prices, flexible terms and very low interest rates are pushing inventory absorption for single family homes to levels not seen since 2007.”

Sparks said multiple offers for the best listed properties are occurring everywhere, including Pierce and Snohomish counties. “Improving sales in one neighborhood helps dwindle inventory, and can push motivated buyers to search for homes in other neighborhoods. This process typically occurs before prices start to stabilize,” he explained.

Has that stabilization begun? “As my old Magic 8-Ball used to tell me: signs point to yes,” according to Sparks, who noted eight counties served by the NWMLS have seen price increases since January. “The sales volume in my Bellevue office is now roughly 10 times what it was in February, with expanded sales in almost every price category. Overall inventory levels have dropped substantially as well. Does this mean the optimal time for home buyers to take full advantage of favorable market conditions has passed? I’d probably defer that to the Magic 8 ball also…“Ask again later.”

Recent fluctuations in mortgage rates have brokers and buyers alike wondering if rates will escalate as inflation worries return.

“While rates now are wonderfully low, waiting has cost buyers. Loans recently available for 4.75% are now 5.25%,” according to broker Kathy Estey. On a $400,000 loan, that means the monthly payment rises from around $2,128 to about $2,253 – and increase of nearly $125. She believes it would be wise to act now for the best selection in the affordable homes. “Who knows if we will see rates of 5% or below again anytime soon,” she wonders.

Commenting on a recent report from the National Association of Realtors showing a third consecutive month of improving pending sales, Lawrence Yun, NAR chief economist, said buyers are responding to very favorable market conditions. “Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”

Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes approximately 28,000 brokers and agents. The organization, based in Kirkland, currently serves 19 counties in western and central Washington.

Statistical Summary by Counties: Market Activity Summary - May 2009 (updated June 5)

May 2009
Single
Family
Homes
+ Condos

LISTINGS

PENDING
SALES

CLOSED SALES

New
Listings

Total
Active

# Pending
Sales

#
Closings

Average
Price

Median
Price

King
4310
13537
2801
1618
$423,875
$351,500

Snohomish
1759
5656
1160
666
$325,502
$299,950

Pierce
1632
6088
1196
643
$252,431
$225,000

Kitsap
531
2005
341
219
$292,797
$240,000

Mason
182
812
73
56
$189,062
$161,405

Skagit
258
1369
140
78
$251,548
$207,250

Grays
Harbor
180
840
75
63
$139,161
$114,000

Lewis
152
722
78
40
$159,230
$138,150

Cowlitz
113
657
82
55
$194,685
$177,900

Grant
145
724
73
36
$166,956
$148,450

Thurston
521
1722
406
214
$273,164
$247,000

San Juan
64
499
14
4
$464,750
$410,000

Island
253
1136
107
86
$299,378
$248,500

Kittitas
152
612
48
38
$250,716
$170,000

Jefferson
84
562
34
12
$298,000
$294,500

Okanogan
86
386
27
17
$159,435
$140,000

Whatcom
496
2024
311
179
$269,633
$250,000

Clark
106
408
64
57
$229,296
$206,900

Pacific
60
404
39
13
$157,333
$175,000

Others
194
1155
91
60
$218,748
$214,000

MLS TOTAL

11,278
41,318
7,160
4,154
$329,680
$280,000

4-County Puget Sound Region Pending Sales (SFH + Condo combined)
(Totals include King, Snohomish, Pierce & Kitsap counties)

 

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2000

3706

4778

5903

5116

5490

5079

4928

5432

4569

4675

4126

3166

2001

4334

5056

5722

5399

5631

5568

5434

5544

4040

4387

4155

3430

2002

4293

4735

5569

5436

6131

5212

5525

6215

5394

5777

4966

4153

2003

4746

5290

6889

6837

7148

7202

7673

7135

6698

6552

4904

4454

2004

4521

6284

8073

7910

7888

8186

7583

7464

6984

6761

6228

5195

2005

5426

6833

8801

8420

8610

8896

8207

8784

7561

7157

6188

4837

2006

5275

6032

8174

7651

8411

8094

7121

7692

6216

6403

5292

4346

2007

4869

6239

7192

6974

7311

6876

6371

5580

4153

4447

3896

2975
2008

3291

4167

4520

4624

4526

4765

4580

4584

4445

 3346 2841 2432
2009 3250 3407 4262 5372 5498              

2009 Median Prices, Closed Sales (SFH + Condo combined)

 
Jan
Feb
Mar
Apr
May
Change
since
Jan
King
$364,137
$348,000
$335,000
$350,000
$351,500
-3.47%
Snohomish
$295,000
$301,750
$304,950
$290,000
$299,950
1.68%
Pierce
$235,000
$239,950
$228,375
$225,000
$225,000
-4.26%
Kitsap
$234,200
$225,000
$246,495
$240,000
$240,000
2.48%
Mason
$170,900
$147,075
$130,000
$137,550
$161,405
-5.56%
Skagit
$246,950
$252,500
$240,000
$225,000
$207,250
-16.08%
Grays
Harbor
$155,855
$131,200
$142,250
$150,000
$114,000
-26.86%
Lewis
$158,250
$162,000
$166,000
$174,950
$138,150
-12.70%
Cowlitz
$161,500
$151,250
$180,000
$179,000
$177,900
10.15%
Grant
$152,557
$166,539
$145,125
$144,000
$148,450
-2.69%
Thurston
$239,950
$259,000
$240,000
$232,600
$247,000
2.94%
San Juan
$573,500
$520,000
$1,162,500
$226,000
$410,000
-28.51%
Island
$243,803
$247,000
$248,500
$244,450
$248,500
1.93%
Kittitas
$230,000
$210,000
$206,675
$196,000
$170,000
-26.09%
Jefferson
$227,500
$325,000
$238,730
$213,750
$294,500
29.45%
Okanogan
$139,000
$137,450
$110,000
$149,000
$140,000
0.72%
Whatcom
$245,000
$246,218
$257,000
$259,450
$250,000
2.04%
Clark
$221,000
$236,375
$248,750
$202,500
$206,900
-6.38%
Pacific
$182,000
$122,500
$147,000
$135,000
$175,000
-3.85%
Others
$183,500
$193,371
$186,500
$224,500
$214,000
16.62%
Total
$273,000
$278,000
$270,000
$270,000
$280,000
2.56%

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Filed under Blog, Community info, Home buying, Home selling, Housing Inventory, Local real estate news, National real estate news by jeremy

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For the Realtors in 2009

         As I move into this New Year my experience seems, so far, more and more one where I'm helping customers NOT sell their homes rather the sell them. Out of 3 listing appointments in 2 weeks and plenty of research, 2 of my prospects re-evaluated their need to move per my urging and one simply didn't want to hear the truth and has re-listed their home at $50,000 over my recommendation. So we know how well that will work. Ill be talking with them in another 300 days. It was an example of ‘That Dog Wont Hunt!' And we all see this.  I'm just the messenger but I have to question what the new listing agent is  thinking?

            As a trusted advisor for my customers, my advice is not helping to bring the pay check home but it is cementing long term relationships which are critical to the survival of any business. Many of the people in my customer database have been with me for years. - As a Realtor and an L.O. I've been able to truly assist many people make a difference in their lives and that has always left me with a sense of satisfaction

            This year has me tightening up all of the tried and proven ‘constant contact' techniques with past and present customers. It's back to basics with touch systems and handing cards out. I almost forgot how to approach people and talk about real estate…sadly though; most of my conversations end on a down beat rather then an upbeat.

READ MORE BELOW page 2….

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Seattle Washington Real Estate Today

 

    Are we seeing a return to a healthy market yet, here in SeattleWashington? Not quite although generally there are some signs of life that are very encouraging.

    he National Association of Realtors or NAR, reported has reported the median resale home price is expected to fall 6.4% this year. Previously the NAR predicted a 4% drop indicating we are not quite out of the woods yet - but we are getting closer hopefully. We think there is some light around the corner. say a year from now or so and things are looking up in some neighborhoods now.

    The Realtor trade group's latest forecast also anticipates a 4.5 percent annual drop in existing-home sales this year, followed by a 6.3 percent rise in sales in 2009.

    Single-family housing starts are expected to plunge 36.3 percent this year and another 1.8 percent in 2009, NAR reports, with the median new-home price dropping 3.1 percent this year.

    Good news is the pending sales index rising out here in the west. The index that gauges pending sales of resale homes fell 13.1 percent compared to last year, however, but was up 6.3 percent from a record low set last month.

    NAR's Pending Home Sales Index, which is based on home-purchase contracts signed in April, rose 4 percent year-over-year in the West while dropping 22.5 percent in the South, 13.1 percent in the Midwest and 12.2 percent in the Northeast. The index data dates back to 2001. It’s good to live here in Seattle I think.

    The monthly asking price of homes in 10 major U.S. cities dropped 0.3 percent in May, but has risen 0.3 percent in the past three months. Another positive sign.

    For-sale listing prices rose in 15 of 26 market areas tracked by Altos Research in May compared to the previous month, and the largest monthly listing-price rise was in Denver, up 3.7 percent. The largest decline in asking price was in Las Vegas, down 3.7 percent. In the past three months, the asking price dropped 6.3 percent in the Las Vegas market and rose 6.5 percent in the Denver market.

    For-sale inventory rose in 25 of 26 markets in May — inventory declined 1.3 percent in Miami during May and has declined 2.4 percent in the past three months.

    The bottom line seems to be a continued trend with fewer homes actively listed and fewer homes sold over last year. This is certainly true in and around KingCounty here in the SeattleWashington area. It seems that home sellers and home buyers are being cautious, of course we need to remember that buyers are down a bit because loans are just a little more difficult to pick up then in the past.

    Thinking of selling your home? Let’s get a CMA, comparative market analysis, of your home value! This will help you establish an accurate sales price range. Click on CMA - no hassles.

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Green Building in Renton and King County

    Although I am not familiar with specific Renton Washington Green home builders, I have been researching the various aspects to this smart building trend.

    There is a list available at the King County web sites of participating Green builders, including developers, painters, carpet companies, etc, and although  I suspect many are not totally on board with the building green concept of ‘save the earth or die’ and are really on the list to attract business,- it’s a good start.

    My wife, Jan, and I hope to incorporate much of this thinking into our next home. Currently we are considering buying a home in the Fairwood community. Mostly because they have sidewalks and my kids can ride their bikes there without being hit by cars as easily – maybe I will learn to golf. Maybe pigs will fly….I mean like golf, I just don’t have the time.

    At any rate, building anything, whether it’s a home or car, without incorporating some environmental common sense is becoming more and more criminal.

    Obviously the intent behind total disregard of this philosophy is ‘Hey-I don’t care about you and your kids and their future’

    Now we have guidelines for new construction and home remodel development that are helpful. Certainly we can’t switch over to Green construction without first having an understanding of what this means.

    Built Green™ is a residential building program of the Master Builders Association developed in partnership with King and SnohomishCounties. The program provides builders, developers and consumers with easy-to-understand rating systems that quantify environmentally preferable building practices for the remodeling or construction of homes, multi-family units, and community developments. Based on the green building scores received, a home is classified as a one-, two-, three-. Four- or five-star Built Green™ project

    Im guessing our current home is about a 1/2 star efficient.

    Built Green™ -certified homes incorporate design strategies and features that offer opportunities to protect the health of families and the environment. This includes:

-  Site and water protection

-  Energy efficiency

-  Health and air quality

-  Materials efficiency

-  Environmentally responsible home ownership

Clever stuff for sure.

    Below are some basic steps we all take as homeowners to begin supporting positive change in our homes and communities. If enough people make changes, others will follow – no one likes to appear to be the local slacker. Except the guy with overgrown bushes and lawns with broken car’s all over. That guy really doesn’t care.

 

How Green Remodeling Can Help Sell Your House

  1. 1.  Replace as many light bulbs as you can with CFLs (compact fluorescents). CFLs use a quarter of the electricity as regular bulbs, and lighting accounts for 20% of home energy use.                     
  2. Upgrade any old or questionable appliances with new Energy Star-certified models. The EPA's blue and white label indicates models must be 10% to 50% more efficient than standard offerings.
  3. Install a programmable thermostat.                               
  4. Make sure cracks are tightly caulked and leaks are sealed. Just doing that can drop your annual heating bill by $100, according to Department of Energy figures. Also consider if your insulation might need beefing up.   
  5. Putting on a fresh coat of the new and now-widely available low volatile organic compounds (VOCs) paints can go a long way toward attracting buyers.  It gives Realtors something to market," she says.
  6. Old carpets can be a real turnoff, and can emit allergens and toxins. Exposing any hardwood floors is a good way to bring out a home's beauty and value, but if you don't have that option consider new, eco-friendly carpeting

 

jch

 

Filed under Blog, Community info, Home buying, Home selling, Local real estate news, Realtors, new construction by jeremy

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Renton New Construction for April - May

 

    I like when I see a Renton new construction home being built. New construction - for the most part- means quality and a guaranty that everything works. Not like my 100 year old home – an ongoing project and head ache. Some one tell my wife, please, cuz she just wont hear it from me. 

    Often we buy a home and within in a few months or a few days the sink backs up or the cable line drops or something. New construction usually means this isn’t going to happen -for a while- and you biggest head ache is getting the contractor back within a year to honor his or her guaranty of finishing and patching any flaws that manifested themselves in that first year of ownership.

    Many of us have had the experience of sticking blue tape on those area's where some trim came loose or nail and screw heads popped through, etc and we live with the new 'blue tape' tapestry for a year, which is the typical time period for a contractor to provide work guaranty’s and they come in and fix up all the little things that sprung loose. And hopefully they stay fixed.
 
    The numbers for new construction in RentonWashington are encouraging. When I listen to the news including CNN, against my better judgment, I hear the reports of new construction for residential homes having dropped way off. And this is true for the most part.
 
    Remember we live in a comparatively robust economy here in the Northwest and particularly in KingCounty and naturally Renton totally rocks right in the middle of it all!. The April 2007 and April 2008 numbers new construction numbers show relative stability. So- are these homes selling? Good question.
 
    Currently in my neighborhood here on Talbot Hill we have some new construction. The stuff around the corner is junk and not worth a second look in my opinion. That being said they will be priced reasonably enough for first time buyers to seriously consider.  Yes, I know that I said new construction reflects reliability and quality and all that good stuff but some builders are still building cheap homes so be aware. These homes are unfortunate for my neighborhood but at least I can’t see them from my house.

    We do however, have a new home directly across the street and it's nice. That builder will place 2 more on those lots I think. The issue he may have is in the list price. Way to expensive and no apparent strategy to 'power market' the home meaning it will probably go the distance for ‘time on market’ and end up selling for less then he would get it if he had priced it better to start with. Remember, my belief is if your not marketing Globally your not talking to your market. Any realtor can stick a sign in the ground and stick you on Craig’s list and the newspaper. Whatever….'Call 'er good!' I don’t think so. If you have a strategy then you are better off.

    Market saturation levels or market inventory is measured in months, now, and not days or minutes like the good old days a couple of years ago. Although this is improving I believe, in the final analysis the list price of your home -and this includes new construction homes- is the bottom line.

    And if your going to spend half a million dollars on a home then you absolutely need to take the time and see what else within the area of your search your dollar can buy. And that half million dollar home better have real hard woods on the floor and not top of the line Pergo. I like Pergo but let’s face it - it's Pergo!
 
    Our Housing market is different. The summer season is just about here. It is still a good market and if you have a strong professional working for you either helping you buy a home or helping you sell a home then you'll probably be okay if you have patience. Renton homes are a smart investment for many reasons and new construction in Renton might be just the thing for you.

Happy house hunting

 

Jch 
(425) 894-4316

Filed under Community info, Home buying, Home selling, Housing Inventory, Local real estate news, new construction by jeremy

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January '08' King county home sales & inventory

                 January 2008 Market Snapshot

(DOM = Days on Market)

Jan inventory.JPG

RULES OF THUMB:

Less then 6 months of Inventory= SELLERS Inventory
More then 6 months of Inventory= BUYERS Inventory

 

 

 King county homes sold. Comparitive numbers as in months worth of inventory are swinging back to a market in the middle. One that is favorable to both Buyers and Sellers.  The number of homes selling now as compared to last year is slightly less, although average selling prices are continuing to be healthy. However some area's have seen a reduction in average selling price over last year.  More on January '08' King county home sales & inventory

Filed under Blog, Community info, Home buying, Home selling, Housing Inventory, Local real estate news, National real estate news by jeremy

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Renton condomiums for sale

    Renton condos are abundant right now and at the time of this writing there are 193 Renton condos on the market for sale. Condo living can make a lot of sense to people because of low maintenance and no yard work. Fortunately my wife, Jan loves to mow the lawn. That’s good for me –

    In the Talbot Hill area of Renton alone, near the Valley Medical Center, there are 11 condos for sale. This is a newer area mostly built no later then the mid 90’s. Some of the Condo communities here include Talbot Park condos, Campen Springs condos, Ashburn condos and Summit Park condos. Many of these are 2004 construction and more recent.

    This can be a strategically smart location for many. These condos are close to all freeway access and offer many local amenities.

    Home sale prices in this area range from $249,000 to $300,000 depending on the home, size, view etc. Search tools for condos are available – I offer one here. Condo Link.

      More on Renton condomiums for sale

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Reasons to buy a home in Renton

    If I’m considering buying an investment property, I look at community strength and there are great reasons to buy a home in Renton. A great example of Renton community strength and intelligent commerce planning is what is happening at the Landing, a 68-acre urban village just off Interstate 405 near the south end of Lake Washington.

 

  For the most part urban planning and expansion in Renton seems to be progressing smartly. The exception being the poorly planned and generally unsupported construction of the downtown Transit center and the severely underused though costly adjoining parking garage.

 

    I just read an article written by Laurence Yun, the chief economist for NAR (National Association of realtors.) In it he sites a 41% increase of foreclosures but reminds us that this increase is mostly the result of investor-heavy real estate purchases in Arizona, California, Florida and Nevada.

  

  These guys have been flipping properties for years and suddenly the bottom dropped out of that plan. I haven’t checked the numbers but he also comments that the number of foreclosures in Utah, New Mexico, North Carolina and South Carolina is actually declining. This would be good news and I would want to confirm this.

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