Posts filed under ‘Housing Market News’
Vashon Island Real Estate: Foreclosure Rumors and Solutions
The Seattle Post-Intelligencer reported on October 30 that the federal government may use $50 billion of the recently approved bailout money bailout money to stem the tide of real estate foreclosures for approximately 3 million homeowners. The $50 billion investment would guarantee roughly $500 billion in mortgages under banking loan policies.
The plan could include loan modification that would lower interest rates for a five-year period and is an aggressive first cut at the damage inflicted on the economy from the US housing recession. The Mortgage Bankers association reported that more than 4 million Americans are at least one month behind on their mortgage payments at the end of June, and 500,000 Americans had started the foreclosure process.
Update: On November 12, the Seattle Post-Intelligencer reports that Federal officials have approved a plan to rework threatened home loans owned or guaranteed by mortgage giants Fannie Mae and Freddie Mac. The Federal Housing Finance Agency, which took over Freddie and Fannie in September, announced the plan with multiple officials from the US Treasury, Department of Housing and Urban Development, and Wells Fargo among others.
Freddie and Fannie own or guarantee about 58% of all single family loans. Those loans represent only 20% of all serious delinquencies.
The new program is scheduled to start in December 15 and is available to borrowers who have missed ar least three payments, have loans for at least 90% of the home’s value, live in the home as a primary residence, and have not filed for bankruptcy.
The program will reduce payments to no more than 38% of the household’s monthly gross income by reducing the interest rate, extending the life of the loan, deferring payment on part of the principal, and customized steps, if needed.
However, the program has been called not extensive enough to help all mortgage holders in crisis.
Vashon Island Real Estate: State of the Market
The Seattle Times Real Estate Section for November 9, 2008, contained two sobering articles about the continuing perturbations in the national housing market. The first article, A Realty Reality Check, written by Ylan Q. Mui of the Washington Post, discussed the impact of Consumer Fear in the face of the current economic turmoil. The second article, Bargains Help Cut Housing Glut, written by James R. Hagerty of the Wall Street Journal, discussed the impact of purchases of foreclosed homes by investors hunting for distressed properties. Taken together, these articles offer sound wisdom to both sellers and buyers on Vashon Island.
The thesis of Mui’s article is that the palpable fear of homesellers that they are losing enormous amounts of home equity if they put their home on the market today, and the corollary fear of buyers that the market has not bottomed out and that they can expect deeper price cuts if they wait it out, has caused the market to freeze. Even though reports suggest that banks are now making mortgage loans available to qualified buyers, demand for mortgages has declined.
Mui writes that psychologists are ranking the emotional angst on a par with the stress of divorce and even death. Behavioral economist Rom Brafman calls the condition “loss aversion,” that is, when FEAR of action creates a stagnant economy. The condition is insidious. It works like this: if the median price of houses were to fall slightly, a few more homes would sell; but, if the median price would rise by the same amount, home buyers would drastically cut back on their willingness to purchase a home.
For example, a 2001 study of the Boston housing market found that sellers who expected to take a loss on selling their condominiums set prices HIGHER than did their competitors, effectively pricing themselves out of the market. By the same token, buyers can also take themselves out of the market with inflated views of their purchasing power in a distressed market, passing by reasonably priced homes on a gamble that a sweeter deal is around the corner.
Consider this emotional analysis with Hagerty’s article concerning the emerging investment market in distressed properties, investors snapping up properties to turn into rental units. The effect is an apparent decline in the amount if inventory on the market which consumers might mistake for a turn in the traditional market.
The mistake is that these sales are not traditional transactions between homeowners and buyers, and they are not spread across the board of available inventory. These transactions are between investors and banks which have foreclosed on properties and are in all liklihood selling the properties at some loss.
Consider. A quarterly Wall Street Journal report on data from 28 cities shows that the glut in homes listed for sale is shrinking. The Census Bureau reported that seasonally adjusted new home sales were down 33% from September 2007. The National Association of Realtors reports that sales of previously occupied homes edged up 1.4% in September relative to 2007. Further, housing analysts caution that many homes that aren’t currently listed for sale may hit the market within the next few years.
Factor in evidence that many sellers have taken their homes off the market to try to wait out the storm, and intend to re-list their properties when they perceive the market has strengthened . . . which will swell the market dramatically down the road. This future glut will continue to depress prices!
As we all know, the general economic news is getting worse. Selective bailouts by the current administration do not seem to stem the tide of market shift.
What is a home seller or buyer to make of this data and the perception that the purchase or sale of property is a fearful event?
First, be cognizant of the role fear is playing in the market and remove it from your decision making calculus. Second, view the purchase of a home as a long term investment, similar to the approach a prudent investor takes in the stock market. This advice applies to a home seller who is moving on to a new property. Third, be aware of the impending increased glut in the market as more foreclosures arise AND as sellers decide to relist their homes out of necessity or a perception that the market is correcting.
Finally, homesellers and real estate professionals must take a cold hard look at today’s market, not the artificial market of yesterday that was fueled by sub-prime lending. A realistic home price today should be set through consultation with an experienced professional who is deeply aware of local market trends.
Celia Chen, director housing economics at Moody’s Economy.com, expects a further drop of 14% before prices bottom out in the second half of 2009. Be aware that the market will not bottom out or recover at the same time for all regions of the country and for all sectors of the housing market.
Vashon Real Estate: Outstanding Financial News for Owners
Forbes Magazine Identifies Seattle Area as the Housing Real Estate Market Most Likely to Respond
Dorothy Pomerantz writes on October 29, 2008, that trends in the commercial real estate market indicate that Seattle is viewed as the strongest area in the country to invest in real estate. In a survey of 700 real estate professionals performed by the Urban Land Institute, Seattle ranks NUMBER ONE in factors tied to economic recovery potential. Those factors include cities that are gateways to international investment, have vital down town areas (note the recent referendum to fund the rehabilitation of the Pike Place Market!!!!), and no glut of office space or condos.
The single-family home sector typically follows the economy of the commercial real estate market.
If you’re a homeowner seeing property values plummet, look to the commercial real estate market for solace. It might tell you which areas will recover fastest–and which will likely remain weak. The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, Realtors and Real Estate Investment Trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.
These traits landed Seattle the No. 1 spot on the list. Stephen Blank, Senior Resident Fellow with the Urban Land Institute, writes, “Seattle is “a diversified market, has a good base of business and is becoming a 24-hour city.” “It’s going to be in a good position to come back.”
Although the city is suffering from the loss of Washington Mutual and the downsizing of Starbucks, Boeing and Microsoft are still relatively strong. Apartment vacancies are low and there aren’t too many new buildings going up, meaning the market won’t be oversupplied. The same is true in the retail space.
The remainging question, of course, is when are consumers going to regain their confidence in the Seattle real estate market and take advantage of the buyers’ market that exists.
Vashon Island: Local Mortgage Rates
The Seattle Times reports a slight uptick in 30-year fixed, 15-year fixed and 1 year ARM rates for the month of October 2008.
Vashon Real Estate: Home Prices
The Seattle Times reported on November 2, 2008, that 4 out of 10 Seattle area homes have had their asking price discounted in response to the state of the current housing market. According to Zip Realty, a national real-estate brokerage which analyzed housing trends for the past three months, most cuts were in the 1 to 5% range. The deepest cuts were on Mercer Island where homes sold for 91.8 per cent of their asking price. Zip Realty provides no analysis for the price discounts. However, fundamental economic theory suggests that the supply/demand ratio still favors buyers in the current market. With Federal financial action, intended to strengthen the availability of mortgage lending, beginning to trickle down to local lenders, it is difficult to forecast how long theis buyers’ market will endure.
Zip Realty found that the percentage of Seattle area homes subject to price reductions has increased 2.9% compared with the same period in 2007. Zip also discovered that Seattle has experienced one of the largest inventory increases among major metropolitan areas, 8.8 % more than the same period in 2007.
Factors to consider in setting a home sale price include:
- whether your home is in top shape for sale, as buyers know there are competitive deal available
- the availability of similar homes in the neighborhood creates price competition
- local foreclosures depress the price of other for-sale homes
- and, the biggest reason, sellers initially list a house too high, which knocks a seller out of the window of opportunity for first-time listings
Vashon Real Estate: Sellers Acting as Lenders!
In view of the tightening mortgage market, some home sellers are seizing the opportunity to finance home sales on their own. For sellers with the capacity to take on financing, this option represents a terrific opportunity to distinguish a home from the competition in this buyers’ market. Among the benefits for a seller is the opportunity to create an income stream via mortgage payments and the availability to realize an interest return. Capital gains can be deferred and create retirement income.
Loans that are most difficult to obtain, including jumbo mortgages and financing for commercial properties, are traditionally subject to owner-financing agreements, however, the same options can be done for any property type and the seller can finance all or part of the loan.
Seller financing opens up a home sale to a broader range of potential buyers who might otherwise be overlooked under traditional mortgage criteria, including self-employed, those who work on a commission, or buyers with credit issues.
There are, of course, risks involved, and sellers need to be well-informed before pursuing this option. It is wise to get an attorney’s eyes on any agreement a seller may contemplate.
For more information on owner financing, visit NoteQueen.com.
Vashon Housing Market Favors First Time Buyers
First time homebuyers are understandably anxious about the availability of financing for a home purchase. However, the availability of loans from local and regional lenders through FHA loan programs remain intact. FHA loans are guaranteed by the government and have low down payments, typically 3% to 5%. Mortgage brokers indicate that the primary difference in lending is in income verification and more thoughtful appraisals.
First time Vashon homebuyers should know that there exists a new tax credit which is essentially an interest-free loan re-payable over 15 years.
So it is a great time to take advantage seriously competitive home prices and an opportunity to take advantage of increases in home values as the economy improves. Your first step is to get a pre-approval letter from a qualified mortgage professional.
September Jump in Existing Home Sales
The National Association of Realtors reports that sales of existing homes (i.e., not band new homes) rose 5.5% in September. This increase is the first in over a year and supports the opinion of analysts that the home sale market financial crisis is reaching equilibrium.
Note also that foreclosure filings in King County fell 42% from August filings, and 13% from September 2007, as reported by Realty Trac. The significance is that fewer distressed properties are available to buyers with cash searching for a bargain.
Consumers should be aware that some mortgage lenders are open to renegotiating and modifying the terms of loans, and even freezing interest rates for a specific period of time. The terms are subject to the specific lender involved and consumer willingness to enter into negotiation. New State laws are helping to reduce mortgage foreclosures . . . tho mortgage counselors are seeing more troubled borrowers. Be aware that it takes a lot of persistence to accomplish a modification.
For more information, check out Solid Ground, a non-profit housing counselor, certified by HUD. Solid Ground currently offer mortgage intervention packages to consumers. Email Solid Ground at housingcounseling@solid-ground.org to request a packet.
Vashon Housing Market: Fall and Winter Home Sales
Despite the commonly held belief that Fall and Winter are tough sledding for home sales, the reality is that buyers shop for homes year round. It may be a mistake to pull a house off the market. Agents say that fall often brings out more “serious” buyers who need to find a home right away. There may be less competition for those buyers because many sellers aren’t willing to stick out the winter. Fall presents a good opportunity for the savvy seller to regroup and reconsider their list price. In Seattle, with the end of fine outdoor weather, Fall presents an opportunity to focus on home upgrades that distinguish their listing.
Vashon Home Finance – ARMs may make sense
The New York Times reports that adjustible rate mortgages, often dismissed by consumers, may still make sense in some instances. Where a home buyer does not intend to remain in a home for more than seven years, the ARM offers a relatively lower interest rate to the standard 30-year fixed. In today’s market, rates on bigger mortgages are giving buyers cause to consider ARMs, particularly where a buyer needs to go to lenders for jumbo loans that cannot be sold to Fannie Mae and Freddie Mac. The threshold figure for a jumbo loan in King and Snohomish Counties is $567,000, slightly above the median price for home sales in the region.
For purposes of comparison, current interest rates on a 30-year fixed hover around 7.5%. A $750,000 house would require a $5249 monthly payment. However, a 5/1 ARM, in which the rate remains fixed for 5 years and then adjusts every 12 months pegged to a market index, could get an initial interest rate of 6.56% resulting in a monthly payment of $4770, a savings of $479 per month.
After the initial 5 year period, however, the interest rate, and house payments, may rise (as much as 6 points!!!!) or fall.
Vashon Home Finance – Reverse Mortgages
For homeowners 62 and older reverse mortgages holds appeal as a method to access home equity and generate much-needed retirement income. The loan typically does not have to be repaid until the last surviving borrower lives in the home or until the house is sold. The loan is generally not taxable and does not affect Social Security or Medicare benefits.
However, the loan has several downsides for your consideration. Closing costs and fees are steep and if you are thinking of leaving your home in two to three years, this is not a financially desirable way to extract money from your house. A home equity loan may be a cheaper option.
Currently the limit on a reverse mortgage is $362, 790. Unfortunately, loan interest is usually variable and compounds, favoring the lender and not the borrower. Borrowers should expect to pay for an appraisal, a credit report, title fees and recording fees.
Vashon Home Finance: Mortgage Loans Available
Can you still get a home loan with less than a 20 or 30 percent down payment? Or with a credit score below 720? Absolutely! There is no shortage of money for home mortgages, no freezing of credit to purchase or finance a house, because the mortgage market has effectively been federalized. More than 90% of new loans are now made through the Federal Housing Administration insurance program. The FHA has unfettered access to the global capital markets and their borrowings are fully guaranteed by the U.S. Treasury.
You can still put down 3% (note 3.5% after January 1) on an FHA insured mortgage. FHA credit standards are generous and forgiving.Scores in hte upper 600s can still qualify for reasonable rates and fees. Maximum loan amounts continue at $729,750 until January 2009 when the max is projected to dip to $625,000.
Vashon Home Buyer Remodeling Advice
The current economic downturn has provided homeowners with an excellent opportunity to take on home renovation and maintenance projects at competitive rates. The National Association of Home Builders estimates that spending on such projects will drop 4 percent this year as compared with 2007. Contractors are currently bending over backwards – even for small jobs such as bathroom renovations and cabinetry – in order to stay afloat. Because homeowner equity is shrinking, fewer remodeling jobs are scheduled and it is a buyers’ market. Until the economy stabilizes, this is an excellent chance to take on deferred projects that will enhance the value of your home.
Vashon v. King County Real Estate Statistics 2007-2008
Vashon King County 
Closed sales 9/07 14 1697
Closed sales 9/08 12 1415
% change -14.3% -7.8%
Median price 9/07 $471,500 $477,345
Median price 9/08 $484,750 $415,000
% change 2.8% -7.8%
The number of houses bought and sold on Vashon are relatively few compared with the larger population of King County homes to draw precise conclusions. However, it is fair to say that Vashon is tracking King County in trends pertaining to fewer transactions occurring and the median prices of homes which are selling. Vashon and Eastside Seattle are comparatively similar in keeping stable median prices compared with 2007. Given the dramatic negative changes in median prices throughout the region, Vashon homes are holding their market value relative to 2007.
Vashon Mortgage News
The slide in home prices across the country has left one in six, or 16%, of U.S. homeowners owing more on a mortgage than their home is worth in the marketplace, raising the possibility of a rise in defaults. With governments around the globe scrambling to shore up stock markets and banks, there is little certainty that the situation will improve in the near term. There are few alternatives available to distressed homeowners seeking to refinance or sell their homes when their mortgages are greater than home value. Foreclosed upon homes have an impact on the value of surrounding homes in a neighborhood. For an excellent summary of the mortgage market, see The Seattle Times, Sunday October 13, p. D4.
Green Homes
Today’s emphasis on “Green Homes” provides home buyers with an opportunity to invest in a home that will produce long term savings in energy bills as well as sustainable environmental benefits. However, many home buyers may be somewhat uncertain as to the technology that is available for Green Homes and also bear some confusion as to what the “Green” label means.
Build Green is a residential green building certification program produced out of collaboration between County and State agencies and the Master Builders Association. The program provides a checklist to gauge environmentally design and building practices. An over view lists factors a homebuyer should consider:
Site and Water Protection; Energy Efficiency (for example, using Energy Star applicances, solar heat and solar water heating); Health and Indoor Air Quality (paint with low Volatile Organic Compound emissions is a high consideration); and finally, the Efficient Use of Building Materials.
Built Green homes can qualify for special mortgage rates and increase eligibility for special tax incentives.
Click here for more information on the Built Green program,
Vashon Real Estate Market Slows
Vashon Island real estate prices have fallen and inventory has grown in the first real downturn Vashon has experienced in 15 or 20 years. Buyers, particularly first-time buyers who can avail themselves of new government incentives, can find true bargains on Vashon.
Unfortunately, sellers are finding that traditional home marketing methods may not be adequate in this stagnant market.
Unique homes, waterfront properties or properties with special charms are still attracting buyers.
Windermere reports that 40% (67 homes) fewer homes were sold in the first 8 months of 2008 as compared with 2007 (107 homes). And time on the market has swelled from 58 days to 94 days within the same time period.
Prices have dropped 14% during this time period. And the number of sellers reducing prices is increasing.
See the complete September 24, 2008, Beachcomber article.
