The Gap Between the Bottom and Middle is Tight, For Now

By Rod Sager, originally posted on Rod's Real Estate News.

Have you felt trapped in your house over the last few years? Biding your time waiting for the real estate market to correct so you can sell? 2015 may be the year for you. Over the last two years here in Clark County we have seen a roughly 20% increase in the median sale price. Many people that were not able to sell now may find themselves in a positive situation. We very well could be at a turning point of opportunity. For people that are making a move up in price, selling their less expensive house now for a slightly lower amount than they might get next year could prove advantageous. The more expensive house they want will also likely be more expensive. So selling a small house for less to get a big house for less sometimes makes sense.

I saw prices on entry level houses flatten a bit in the second half of 2014. I believe that the market for the 40 year old 3 bed 2 bath home is just about as high as the economy will support right now. Barring any dramatic improvement in the overall economic condition 2015 is a great time to sell an entry level home. Where the market continues to see improving prices is that middle move up. Last summer I ran into situations where a simple 1400 foot ranch home would sell for $220k and a gorgeous 2100 foot home in the same area was fetching just 10% more. I believe that the gap in those market segments should widen this year as the entry level could be flat and the middle will continue to swell in values. Selling the little house to get a big one is prime for 2015. Some people may even find that their house payment is only marginally higher since rates are quite low right now.

Generally a real estate market rebound will begin at the bottom. The bottom of the market can drive the middle. If the bottom is soft so will the middle be. When the bottom begins to move up in value the middle is going to trail behind for at least six months. So that leaves a window to move from the bottom to the middle with the move up house feeling like a bargain. Once the bottom hits the high plateau then there is only a six month window of opportunity to capitalize on the middle lagging behind on growth. This is the gap between the market segments. As an example, entry level homes that were fetching $160,000 two years ago are now selling for $200,000. But the middle houses that were getting $220,000 two years ago are running about $260,000 now. The 25% gain at the bottom and a 16% at the middle translates into a relative deal for the move up buyer. This year there is a good chance the $200,000 house will only rise a little maybe to $210,000 but that middle market is showing signs of activity suggesting the 260,000 house will get to $285,000 this year. So holding out for an extra ten to buy a house that will cost an extra 25 may not be the best approach.

Keep an eye on the real estate trends. Have your favorite Realtor® send you listings so you can keep your finger on the pulse of the market. I can only see trends, I am no Nostradamus, so anything can happen. Real estate is however a very trend based market and it typically follows modestly predictable patterns.

Two Ways to Invest in Property When You Don't Have a Ton of $$ to Start Out With

by Dan Jensen
Relocation Services Director - Equity Northwest Properties Group
Investing in Real Estate is a dream for some, a practical activity for others, and the path taken by so many people over years and years of our Country's history to amass significant financial holdings and net worth!

Okay, so RE is a sound path to building your financial empire, but what if you don't have a ton of dough to start with? Is it still possible to invest in real estate?

Short answer is 'Yes Indeed'.

Example/Tool Number One - Option

You see a house you like that's for sale or may be soon... someone you happened to be talking with who said they need to sell their house in the foreseeable future but aren't quite ready at this point. Maybe next year after the kids finish the school year. You express interest in the "possibility" of buying their house and ask if they might consider selling you an Option to Purchase the home - say $500 for the option right to buy the home at a price you both think is "fair".

The Option can be good for any length of time, but let's say this one is good for one year. As time moves along, the value of similar homes increases just a bit, 5% in this case, and the agreed upon price you and the owner set is now a few thousand dollars less than "Fair Mkt Value" for the home. You run an ad in Craigslist offering to sell your Option for $2500 and whoever buys your Option owns the lower price for the house that you negotiated. Whether they exercise the option and buy the house or not, you've made a little extra that allows you to do 2 or 3 similar options and roll up the totals over time to "bankroll" your other RE investment strategies that do require a bit a coin to complete.

Example/Tool Number Two - Lease Purchase

You do your research and find a couple of houses that haven't sold for several weeks. One of the owners just lowered the price on their house to try to attract a buyer, and the other one is running ads that have words like "Urgent", "Hurry", "Must Sell NOW", and the like, telling you they really need to get out from under their mortgage.

You make a couple of calls and ask if they will consider you taking over their payments IMMEDIATELY and put together a Lease Purchase for 3-6 years. The IMMEDIATE relief from their next mortgage payment is enough to persuade one of the owners to accept your Lease Purchase proposal, you write it up with a "Fair" price for their home stipulated, and run a different ad on CL this time...

You're looking for a buyer-tenant for the house. You've made the first mortgage payment ($1600 or so) to your home owner, which buys you a month to find a suitable and interested buyer/tenant for the home.  Your Buyer/Tenant wants to own a home, but they can't get a mortgage for whatever reason, so your Lease Purchase offer makes home ownership possible for them as they repair their credit, season their time at their job, or whatever the case may be.

In short, your are providing them with the opportunity to own a home, something they deeply want, and in doing so, they are not only fulfilling the terms of your Lease Purchase agreement with your seller, but your new Agreement with your Buyer/Tenant is sweetened a bit and will yield money down and a little monthly cash flow for you as well. Well constructed and negotiated, there's likely another bit of cash for you on the back end of the deal when your Buyer/Tenant buys the house!

Not a bad deal throughout!

The details are key here, and too many to try to summarize here, but this Tool allows you to create 1.) cash in hand on the front end, 2.) cash flow throughout the agreement term, and 3.) profit spread on the back end when your Buyer/Tenant executes the purchase of the home.

In both examples above, you have never "OWNED" either home, but you negotiated "CONTROL"  OF both homes that results in PROFIT FOR YOU!

As small pieces of profit begin to add up, AND WITH SMALL amounts invested by you, it opens the door to additional Investment Tools that benefit from having more of a financial capability. We'll cover a couple of those ADDITIONAL TOOLS in our next post here.

In the mean time, get ready for a great Independence Day week ahead of us and thanks for checking out our blog!

Early Spring Often Sets the Tone

by Rod Sager

Here is an article from one of my other real estate blogs.

Real Estate with Realtor Rod Sager: Early Spring Often Sets the Tone: Looking back over the years I find that the early part of spring has proven to be a pretty good Nostradamus act for the real estate market. ...

The Back to School Lull and Home Affordability

by Rod Sager

All the kiddies are on the bus and off to school. Much to their chagrin but leaving mom and dad with a happy grin. This is a hectic time in the lives of families as the summer transitions to fall. I am noticing here in the local market a bit of a lull in activity. I believe we will see a slow down as is typical for September, but should still beat last year's ninth month figures. As the month comes to a close it is likely to pick up a bit.

Autumn can be a great time to sell or buy a home. The air is crisp and clean, colors begin to shift to golden hues of red and orange. It is just a wonderful time of year. If you are listing a home it is wise to keep the leaves clear of the walkways. Wet leaves are hazardous and may keep some people from looking at the home thoroughly. Keep the rain gutters clear of debris as well. Overflowing gutters are easy to fix but leave a negative impression on buyers. Here is a link to a great article on selling your home in the fall. One thing you will find in the article is a tip on keeping the home as bright as possible. Here in the Washington we have the double whammy as the year labors on. First, we get allot of cloud cover which makes homes darker inside during the day. Second we are well above 45 degrees of latitude and that means a low hanging sun for an even darker dark day. The bottom line is bright sells!

Source, Regional Multiple Listing Service

For buyers the time may be right now. As the activity slows down just a touch, the manic multiple offer scenarios will be a little less frequent. Rates are stable, for now, but the end of this year marks the end of several key federal programs that could create a dilemma for entry level buyers. Of course prices have been edging up as well, so buyers that wait will likely pay more. The home affordability index peaked in early 2012 and now is beginning to tighten up. The chart shows the index based on an NAR model. The value is the percentage of the mortgage on a median priced home that the median family income can support. As of June this year it was 167%. That means a family earning the median income in this area can afford 167% of the mortgage of the median priced home. This is still very affordable and frankly means that even families well below the median income can qualify for home at or near the median. Home affordability is more important than price since price is relative. If a house is $50,000 that is a low price, but if a buyer only qualifies for $45,000 than it is relatively expensive and out of reach. Keeping the affordability index at 100% or more is healthy for the market. we have a healthy market right now, so buyers should jump in and sellers should get ready to move.

Real estate is a local business.

By Rod Sager

How often have you heard the expression, "real estate is about location, location, location"? If we are to take this idea at face value, then real estate is a local business. Local companies are much more in tune with the neighborhood trends, community developments, municipal and county regulatory and legislative agendas, and other important facts about the area. It stands to reason that working with a local real estate professional in a local company is a good idea.

This blog has been established to get good real estate information out to the public. We often post tips about home care, and local market trends. Today we will talk about the importance of local businesses and local professionals.

When choosing a real estate agent, buyers ought to think about the local aspect of real estate. Will this person understand the immediate market they are interested in? Is the company they represent a locally owned company or a national franchise? If the latter, then are they at least locally focused. Purchasing a home is most likely the single most expensive thing most people will ever buy. It seems obvious that care and attention to whom trust is placed to represent that transaction is paramount.

Local is critical because the difference between a "house" and a "home" is local. Building a home from a house is done with family, friends, neighborhoods, schools, churches, clubs and services. Local, local, local is as important as location, location, location because knowing the right location requires a local awareness.

If moving from Portland, OR buyers should consider carefully before using a dual licensed Portland agent for a Clark County home purchase. Although Portland is just across the river, it is a state away. Real estate in Oregon is conducted in a similar fashion but there are many different facets and nuanced subtleties that can be significant enough to bring about pause.

It's been more than a decade since Gene Thompson left one of America's largest national real estate firms to open his own brokerage here in Vancouver U.S.A. Equity Northwest Properties has always adhered to Gene's idea that real estate is a local business. One of the advantages to large national chains has always been resources. But national chains are typically run from a corporate office in some far away place. Local branches are often force fed a staple diet of the latest corporate headquarters buzz program. As we turned the century over to a new millennium many of those "resources" began to become widely accessible through the ever present internet technology. Now smaller, local companies have similar access. The resource edge offered by the big national brokerages has eroded significantly since 2000.

That has allowed companies like Equity Northwest Properties to thrive. Local Realtors® working local markets with a local corporate policy is pure bliss. This local minded business model has allowed Gene's company to evolve into one of the region's largest independent brokerages with offices in Vancouver, Camas and Kelso. Between the three offices are affiliations with the two largest multiple listing services in the Pacific Northwest, both the RMLS and NWMLS. That makes Equity a very local company with a regional reach. This is a powerful combination.

In conclusion buyers and sellers should strongly consider the local aspect of real estate when deciding upon whom they will hire to represent them. The best decisions are made with the best information and real estate information is local to the core.

July's MLS sales figures for Clark County were stellar

By Rod Sager (from Real Estate with Realtor Rod, August 16th, 2013)

The numbers are in for July from our local multiple listing service and they look great. Looking back first at last year, July 2012 was healthy but not stellar. Inventory was starting to tighten up and demand was strong enough in certain segments to generate multiple offers. 499 transactions were closed in July 2012 for Clark County against this year's total of 696. We are still well off the frenzied pace of 2005-2007 but clearly the best we've seen since "the crash".

Evaluating numbers is never as easy as just looking at the one or two "big" stats. Often people, including some Realtors®, look at median price or total unit sales as an indicator that all market segments are moving equally. Just because the median price is up 21% by no means suggests that any random house that was sold last year is now worth 21% more this year. The real estate market is very complex with neighborhood fluctuations, locations, home size, price range, and styles often performing independent of each other based on market demand or supply.

The chart below shows the "big" over all county stats for this local market and then breaks the numbers down a little further to show some broad segment trends. The big question for John and Sally homeowner is often geared towards, "can I sell MY house right now"? If John and Sally own a condo they may not be much better off this year than they were last year in market appreciation. The condo market is almost always late to recover.

Last year the sales figures were heaviest in the entry level market. Those $125-150k three bedroom ramblers were being snatched up and as such, supply tightened up and prices soared. This year that market segment was priced high enough that demand slowed down a little, but the middle market surged with larger four bedroom houses seeing significant increases in unit sales. Those bigger mid sized homes saw a massive 59% increase in sales but a more modest 13% increase in median price.

Last year I said that the bottom has to tighten up first before the middle can take off. Well, the bottom did tighten up and now the middle is taking off this year. That is driving the increase in median price. The smaller two bedroom houses have peaked with only a 1.3% increase in median price despite a large surge in unit sales of 46%. Even the bread and butter three bedroom market that was red hot last year, is showing preliminary indications that the buyers are nearing their limits. The 18% increase in median against a large surge of 29% in units sold is still quite robust, however. The sellers in the entry level often move up to that bigger house and as they sell their 2 and 3 bedroom homes they move into the middle market. The 59% increase in unit sales in that segment will likely produce more impressive median increases when we check the numbers in a few months.

Of course this discussion has to hinge on keeping other complex variables favorable, such as the general economy, jobs and the ever critical mortgage rates.

The big takeaway for homeowners is the fact that their home that may have been upside down or too tight to sell, could in fact be a seller today. Contact your favorite Realtor® for a Comparative Market Analysis on your home. Most offer this service for no charge, I certainly will.