How Rising Rates Affect Home Affordability

Happy almost spring! As far as I’m concerned, it can’t come soon enough! In this post, I thought I would talk a little about mortgage interest rates and how, as rates rise, affordability decreases. Rates for a 30 year fixed mortgage are currently hovering around 4.32%. In the first quarter of 2013, the same 30 year fixed rate averaged 3.5%. According to the Mortgage Bankers Association, rates are projected to be about 5.2% by next spring. Fannie Mae and Freddie Mac forecasts are also in that range at 5.0% and 5.3%, respectively. If you are thinking about making a move and can’t decide whether to do it this year or next, let’s look at an example of house payments with the different rates.

A $400,000 loan last year at 3.5% would have equaled a monthly principle and interest payment of $1,796. That same $400K loan right now would be $188 more per month at $1,984. A year from now, if the projections hold, that same payment at 5.2% will be $2,196 per month, which is $212 per month more than right now. In other words, it will cost you $2,544 more per year if you wait until next year, and that equals $76,320 over the life of the loan, if you hold it the full 30 years. And to put icing on the cake, the price of homes between now and the spring of 2015 are projected to increase 3.8%-5.6% as well, thus further decreasing your purchasing power.

First and foremost, it is most important to make a move when the timing is right for you and your family. But if the timing isn’t as critical, you may want to consider making that move sooner than later if you will be financing the purchase with a mortgage.

 

Posted on March 6, 2014 at 11:46 am
Ryan Francescutti | Category: Buyer Tips, Real Estate Stats and Trends, Seller Tips | Tagged , , , ,

Rational Exuberance?

Is the housing market in a state of rational exuberance? Since the beginning of this year, activity, sentiment, and even prices, have taken a turn for the better. And it does seem that a solid case can be made that the housing market finally bottomed in late 2011 into the beginning of 2012. BUT, let’s not get too far ahead of ourselves and let’s not get too excited that prices are going to skyrocket and go up at a bubble inducing 10% per year again. However, if you look at the past 2 months in King County, “asking” prices are indeed skyrocketing up while sales prices have only increased a modest amount. Take a look at this chart for average For Sale and Sold prices in King County over the past 15 months:

The average listed price (the green line) is currently $693,000. That is up 5.5% over last month alone and up 19.5% from May 2011! The red line is the average sold price and you can see that it has bumped up a bit since the beginning of the year, but it is only up $1,000 from April and is still actually down nearly 2% from last May. Here’s the same chart over the past 9 years:

To me, that recent blip in asking prices seems a bit irrationally exuberant to me, given what we’ve been through. However, if you dive a little more deeply into the numbers, inventory numbers are very low under $500k and staying low up to the $1million mark. So it looks like a good part of this widening of the gap between bid and ask is that the lower priced and more affordable homes are just selling quick and often. Higher priced homes are staying on the market longer and therefore the average price of “for sale” homes is simply a higher average price. If you’ve been looking to buy a home lately, you’ll know that inventory is very tight, to nonexistent, under $500k and when something does come on the market, especially in desirable neighborhoods, it’ll often be met with a bidding war.

It is essentially a sellers market in the Seattle area right now, especially in the lower price ranges. However, that does not mean you can ask 20% more for your home than you could have last year, it just means that you can lean toward the top end of your price range rather than have to settle at the bottom of the range to undercut your nearest competition like we’ve had to do the past few years. Right now, you may not have any competition in your neighborhood because it has all sold.

The moral of the story is that sellers can be rationally exuberant about selling right now, but just don’t be too irrationally exuberant when it comes to pricing your home. The same laws apply: if you price it fair, present it right, and your home is in top condition, you will sell quickly.

Posted on June 13, 2012 at 10:23 am
Ryan Francescutti | Category: Listings, Real Estate Stats and Trends, Seller Tips | Tagged , , , , , ,

More Support for a Housing Turnaround

The latest NW Multiple Listing Service press release title says that the “Western Washington housing market is energized and showing signs of a definite turnaround.” You can read the entire release here. One big fact given is that the year-over-year change in selling prices was positive for the first time in four years! It was a modest 1.27% but still positive.

Inventory remains tight which is creating a sellers market in some areas. However, the article goes on to say that while we may technically be in a sellers market in many areas, enthusiasm needs to be tempered because that in and of itself, doesn’t mean homes are worth more money. It basically just means that the homes that are priced and presented well will more likely see an offer sooner rather than later.

 

Posted on May 3, 2012 at 3:25 pm
Ryan Francescutti | Category: Real Estate Stats and Trends | Tagged ,

Has the Housing Market Reached the Bottom?

The latest NW Multiple Listing Service press release titled ‘Washington Homebuyers Realizing “Market may have Reached Bottom of Cycle”‘ suggests that confidence in a market bottom is increasing across the Puget Sound. Very low inventory and very low interest rates contributed toward a huge pending sale increase in February. For example, the release states: “Within King County, pending sales were particularly robust in the Lake Forest Park/Kenmore neighborhoods (up 73 percent), Kent (up 61 percent), Burien/Normandy Park (up 58 percent) and central Seattle (up 56 percent). The northeast portion of Snohomish County also experienced strong sales (up 63 percent from a year ago).” You can read the full article here.

Posted on March 12, 2012 at 1:27 pm
Ryan Francescutti | Category: Real Estate Stats and Trends | Tagged , , , ,

Low Inventory = Good News for Sellers?

So far, the theme of 2012 is that there is definitely a lack of inventory. The housing market has been extremely busy in the low to median price ranges, but the upper middle to higher price ranges are starting to pick up steam too. The fact is, many buyers literally can’t find good homes to buy! Low prices and extremely low interest rates have pulled a lot of buyers off the fence in the first two months of the year. More homes will come on the market as we get into spring but that should be met with more buyers as well. So, it is reasonable to expect brisk activity for at least the next several months.

Since pictures can often tell a better story than words, take a look at this “heat map” for King and Snohomish Counties. It shows how most every MLS area has gone from a “balanced market” with 3-6 months of inventory in February 2011 to a “seller’s advantage” with less than 3 months of inventory as of the end of February 2012. Ignore most of the national news when it comes to housing because real estate truly is local. If you’re thinking about making a move, Call a Realtor with experience who knows your neighborhood to get specific professional advice for your situation.

Posted on March 8, 2012 at 3:36 pm
Ryan Francescutti | Category: Buyer Tips, Listings, Real Estate Stats and Trends, Realtor Benefits, Seller Tips | Tagged , , , , , , ,

Housing market starting to heal itself?

 

Latest NW Multiple Listing Service press release:  “Housing market “healing itself,” numbers are “astoundingly good.” Click here for the full release: http://www.nwrealestate.com/nwrpub/common/news.cfm

Posted on February 6, 2012 at 6:04 pm
Ryan Francescutti | Category: Real Estate Stats and Trends | Tagged ,

King County Real Estate Recap for December 2011

 

Happy New Year! This month, I would like to give a perspective of King County real estate activity over the last 5 years…

 

If you recall, at the end of 2006 and at the beginning of 2007, the housing market was starting to shudder a bit in other parts of the country, but things were still going pretty strong in the Seattle area. That spring of 2007 was very busy and prices and sales topped out in the middle of that year. The number of sales started to decline after June 2007 but the inventory kept ballooning to new heights until the middle of 2008. Inventory remained elevated through 2009 and most of 2010. Inventory in 2011 actually remained relatively low throughout the entire year and especially as we hit the end of the year.

 

Looking back to December 2006, we had almost exactly the same amount of active homes for sale as we did last month. But, the number of Pending sales has declined 17% and the number of sold properties has declined 24% since then. While that doesn’t sound great, Pending and Closed sales are up over 2010 levels so the market seems to be trying to find a base.

 

As far as prices go, in King County we peaked out in July 2007 at an average sales price of $599,000. Average dollar per square foot reached it’s top in May 2007 at $267/sqft. Last month, the average sales price was $392,000 and $175/sqft. That is a decline of a little over 34%. While we are essentially at new lows since the peak, part of the softness in pricing may be seasonal so I would suspect at least a little rebound as we head into spring and summer.

 

Another interesting market dynamic is to look at the ‘Average Days on Market’ and the ‘Sales Price as a Percentage of the List Price.’ In December 2006, we were averaging 64 days on the market. Last month, it was 99 days, or a 54% increase. Also, in December 2006, sales prices were averaging 97% of the Original List Price. Last month, homes were selling on average at 92% of the Original List Price.

 

Finally, after a wild ride up in late 2008 into 2009, the inventory of active homes for sale has come back down to pre-crisis levels. In December 2006, there was 3.1 months of inventory and last month there was 4.2 months of inventory. I can’t stress enough how important a modest amount of homes for sale is for a healthy market. It’s good old fashioned supply and demand. In the boom years in 2005/2006, there was a ton of demand and very little supply, and then in the bust years, there was huge supply but little demand. Now we are back to modest supply and modest demand which I think is a perfect recipe for securing a base from which prices and activity can grow.

 

January has started off with a bang with busy open houses and buyers resolving to get off the fence. I expect this to be a busy spring and another decent year overall with a slight increase in activity over 2011 and even a slight increase in prices. That’s just a best guess on my part but I think the housing market now has the wind at its back given that we have a slightly better economy and job market and there is the desire for politicians to “not rock the boat” in an election year. Top that off with a little inflation and I believe the market will be in better shape come 2013.

 

 

 

*Statistics not compiled nor published by the NWMLS

Posted on January 9, 2012 at 4:21 pm
Ryan Francescutti | Category: Real Estate Stats and Trends | Tagged ,

What Can a REALTOR® Do For You as a Buyer?

 

When we think of selling a home, the services a REALTOR® can provide usually seem worth the cost of their
commission, but what about as a buyer? What can a REALTOR® do for you as a home buyer, and is the commission
worth the services they can provide?  Remember, even though the commission is usually paid by the seller, hiring a REALTOR® as a buyer’s agent means your interests will be represented and protected.

 

Here are five great reasons you should hire a REALTOR® when you are in the market for a new home!

 

  • REALTORS® Can Help You Determine Your Budget—With a few simple pieces of information, a REALTOR® can help you pre-determine what kind of budget you may be looking at for your new home, and can match you with potential lenders that are right for you.

 

  • REALTORS® Have Access To Resources You Don’t—While a lot of real estate listings are available online, there are still
    resources and listings that are only available through a REALTOR®.  If you are looking for something very specific, having their insider knowledge may be crucial to finding that perfect home.

 

  • REALTORS® Can Read Between The Lines Of Listings—There are a lot of catchy phrases that often appear in home listings, and your agent can tell you what they really mean.

 

  • REALTORS® Increase Your Negotiating Power—A REALTOR® can not only increase your ability to negotiate things like price, they can also give you advice on things like contingency contracts and required paperwork.

 

  • A REALTOR® Can Help You Navigate Through The Closing Process—The closing process can be a complicated process, and a REALTOR® can make sure all the details are addressed and that you are making a good financial investment.

 

Purchasing a home is a huge financial investment, and having a professional REALTOR® looking after your interests through the process is very important.

 

Posted on January 3, 2012 at 12:06 pm
Ryan Francescutti | Category: Buyer Tips, Realtor Benefits, Seller Tips | Tagged , , , , , , , ,