Monday, August 19, 2013

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.

Tuesday, August 13, 2013

CoreLogic: Rapid Rise in Home Prices 'Remarkable'

Re-blogged from Rod Sager's Blog

This just in from the National Association of Realtors®


DAILY REAL ESTATE NEWS | WEDNESDAY, AUGUST 07, 2013


During the first six months of this year, home prices jumped 10 percent, the fastest pace in 36 years, CoreLogic reports. Mark Fleming, chief economist with CoreLogic, called the 10 percent jump "remarkable."

In June, the latest data available, home prices were up 11.6 percent year over year, according to CoreLogic’s home price index, which reflects distressed sales as well. June marked the 16th consecutive month of increases.

The pace of home price appreciation is showing signs of slowing. In June, prices rose 1.9 percent compared to May -- a slower pace for increases than in recent months. From April to May, prices rose 2.6 percent, while they rose nearly 2.8 percent in April from March.

Some analysts point to a slowing due to rising mortgage rates, fewer investors making purchases, and a rise in inventory levels of homes for sale. The National Association of REALTORS® reported that inventories of existing homes for sale rose to 5.2 months in June from 5 months in May. A six- to seven-month supply is considered a balanced market.

Still, prices are not showing signs of stalling. CoreLogic analysts predict that home prices will be up 12.5 percent year over year in July.

The five states with the highest home price appreciation year-over-year, according to CoreLogic’s June stats:
  • Nevada: +26.5%
  • California: +21.4%
  • Wyoming: +16.7%
  • Arizona: +16.2%
  • Georgia: +14.3%

Source: “Home Prices Rising at Fastest Pace in 36 Years,” Mortgage News Daily (Aug. 6, 2013) and “Home prices rise again, but at a slower pace,” USA Today (Aug. 6, 2013)

Rod's two cents: I think we will continue to enjoy a robust and healthy appreciation over the next 12-18 months.  I don't think it will continue at these break neck speeds, however. Interest rate volatility and a slow surge in new resale inventory as homeowners right the ship financially will balance things back to a healthy but modest rate of growth in the middle single digits.

Monday, August 5, 2013

Keep an Eye on the Market

By Rod Sager

There is a huge inventory of homes that were purchased at or near the height of the market from 2004-2008. The average homeowner moves every seven years so many of these homeowners that bought at the peak are getting towards that "time to move" point. The problem is that values for many of them are still not quite high enough to clear the loan obligation. Many of these would be sellers are sitting on the fence patiently waiting for the market to yield the price they need to exit clean.

For Realtors® and sellers this is a 'watch the market' time. We enjoyed a robust 8-12% gain in values over the last twelve months. If this upward pricing trend continues, many homeowners will finally exit the proverbial tunnel and be able to sell their home and clear all liens and fees.

Our local market and many other markets around the nation are seeing tight inventory, especially in the entry level price range. This is driving an increase in price. Low interest rates are also helping to keep demand relatively high. As these 'top of the market' homes become viable to sell again, we will see less of a squeeze on inventory. This can be a bit precarious, too much inventory may cause prices to flatten out if demand does not keep up. So long as interest rates remain at or below 5%, I believe the market will continue its growth, even if inventory levels fatten up. A combination of higher rates in the more normal range of 6-7% and bulkier inventory would likely cause the prices to stop rising or at least severely slow down.

What does all this really mean? For buyers that really want to own, rather than rent, now is truly the time to buy. Rates are low and there is no guarantee they will remain low. Prices are rising but still relatively low. For sellers, things are a little dicey at the moment. Selling now could be the genius move of the decade or it could be one of those "oops" I should have waited situations. No one really knows what this fragile market will do. If you are a owner occupant seller and you actually want to move then selling as soon as possible makes sense. If you are selling based on an investment then you are forced to gamble a bit. Wait or sell? For an investor I would wait a little longer but of course that may or may not pan out. In the end, I believe real estate should be a long term investment and waiting will rarely cost you money, it may just cost you some time.

Sellers and would be sellers should remain 'market engaged'. In other words, pay attention. Things are moving in generally positive directions and the opportunity to sell will present itself soon. Potential sellers should stay in contact with their favorite agent or broker and 'keep and eye on the market'.

Monday, July 22, 2013

Rent or Own?

Census information shows some interesting differences in housing that is available for renters vs. that which is available for sale. Overall the most interesting statistic is the median age of an owner at 54 versus the median for a renter at 39. I believe the age gap to be attributed primarily between two key factors. Younger people earn less money on average and tend to be more mobile. Mobility lends itself to rent rather than own. But if money is driving a younger person away from home ownership, this market is an ideal opportunity to own sooner rather than later. With home prices on the rise but still low and rates remaining at the historical bottom of the range, money is not the issue.

I have found that my buyers over the last two years have in fact been on average younger than ever. I would imagine that the next iteration of this bi-annual government report will show a closer gap between owners and renters as young people seem to jumping at the opportunity to buy that this market has provided.

From the Oregonian, Portland, OR:





"Rent or buy? A recent housing survey shows that the stock of Portland-area rental homes offers a very different sent of amenities and conditions than metro owner-occupied homes.

Many of the differences are likely explained by demographics. Homeowners have a median household income of $70,000, while renters' median household income is $34,164. Renters also skew younger: the median age for the head householder among renters is 39, compared with 54 for homeowners.

The American Housing Survey, conducted by the Census Bureau and the Department of Housing and Urban Development every two years, features metro-area numbers are released on a rotating basis. Portland's haven't been since 2002.

The Census Bureau surveyed 3,885 Portland-area householders, or about one in every 240 housing units. These numbers reflect data collected in 2011.

-- Elliot Njus"

Monday, July 15, 2013

Young People Want to Buy

I thought this was an interesting article from the NAR:

WASHINGTON (July 9, 2013) – Millennials are more confident than any other age group that their recent home purchase was a good financial investment, according to a new study released today. The inaugural 2013 National Association of Realtors® Home Buyer and Seller Generational Trends evaluated the generational differences of recent home buyers and sellers and found that while eight out of 10 recent buyers considered their home purchase a good financial investment, the number was even higher, 85 percent, for younger buyers under the age of 32.

“Homeownership is an investment in your future, and is how many younger American families begin to accumulate wealth,” said Paul Bishop, NAR vice president of research. “The oldest of the Millennial generation are now entering the years in which people typically buy a first home, and despite the recent downturn, homeownership still matters to them. The sheer size of the Millennial generation, the largest in history after baby boomers, is expected to give a powerful boost to long-run housing demand, though in the short-term mortgage accessibility and student debt repayment remain challenges.”

The study found that the largest group of recent buyers was Generation X Americans, those born between 1965 and 1979, who comprised 31 percent of recent purchases, followed closely by Millennials, sometimes called Generation Y, those born between 1980 and 2000, at 28 percent. Percentages of recent home purchases among prior generations was significantly lower, 18 percent were Younger Boomers, those born between 1955 and 1964; 14 percent were Older Boomers, Americans born between 1946 and 1954; and 10 percent were from the Silent Generation, those born between 1925 and 1945.

The median age of Millennial home buyers was 28, their median income was $66,200 and they typically bought a 1,700-square foot home costing $165,000. The typical Gen X buyer was 39 years old, had a median income of $93,100, and purchased a 2,100-square foot home costing $235,000.

The previous living arrangement of recent buyers varied greatly across the generations; among Millennials, 65 percent rented an apartment or house and 22 percent lived with their parents, relatives or friends; more than half of all Baby Boomer and Silent Generation buyers owned their previous residence.

The study found that older generations of home buyers prefer more recently built homes. Millennials typically bought homes built around 1986, nearly a decade older than the homes typically bought by the Silent Generation.

Younger buyers had a tendency to stay closer to their previous residence, often staying within 10 miles, whereas older buyers moved longer distances, typically more than 20 miles from their previous home.

Younger buyers were more likely to buy in an urban or central city area than older buyers; 21 percent of Millennials bought a home in an urban location compared to only 13 percent of Older Boomer and Silent Generation buyers.

The reason for buying a home also varies across the generations; younger buyers most often cited the desire to own a home of their own whereas older buyers wanted to be closer to family and friends. When it comes to factors influencing neighborhood choice, younger generations cited convenience to jobs, affordability of homes, and quality of the school district. Older generations placed higher importance on convenience to family and friends and healthcare facilities.

When it comes to a home’s green features, younger buyers placed higher importance on commuting costs than older generations who placed higher importance on a home’s energy efficient features and living in an environmentally friendly community.

Millennials tended to make more compromises with their home purchase than any other generation. Millennials most often conceded on the price and size of the home, lot size, distance from job and style of home; whereas nearly half of Older Boomer and Silent Generation buyers made no compromises on their recent home purchase.

As the age of recent buyers increases so does the rate of owning more than one home; among Millennials, 8 percent own more than one home, which could include either a vacation home or investment property; compared to 21 percent of Gen X-ers, 28 percent of Younger Boomers, and 27 percent of Older Boomers, and 26 percent of the Silent Generation.

Home buyers of all ages often begin the home buying process by looking online for properties for sales; however, the frequency of use of the internet to search for homes decreases as age increases. Ninety percent of Millennials frequently used the internet to search for homes compared to less than half of Silent Generation buyers. Younger generations of buyers were also more likely to find the home they purchased through the internet; older buyers most often learned about the home they purchased from their real estate agent.

Buyers of all ages gain many benefits from working with a real estate professional. Among the age groups, younger buyers are more likely to want an agent’s help understanding the home buying process, presumably because many are buying a home for the first time. Younger buyers were most often referred to their agent by a friend, neighbor or relative whereas older buyers were increasingly likely to work with the same agent they previously used to buy or sell a home.

When it comes to choosing an agent, reputation was important to buyers of all ages; however, younger buyers more often cited an agent’s honesty and trustworthiness as the most important factor compared to older buyers who most often cited the agent’s knowledge of the neighborhood – perhaps because older buyers tend to move further distances and may have less familiarity with area.

The median down payment for Millennials was 5 percent, considerably less than older generations of buyers whose down payment ranged from 8 percent for Gen X buyers to 22 percent for Silent Generation buyers. Younger buyers who financed their home purchase most often relied on savings for their down payment whereas older buyers were more likely use proceeds from the sale of a primary residence.

“An interesting finding is that Older Boomers and Silent Generation buyers found the mortgage application and approval process more difficult than expected compared to younger buyers,” said Bishop. “This underscores the ongoing challenges that many credit worthy home buyers face with today’s tight credit standards.”

The largest group of recent home sellers was from Generation X, comprising 30 percent of recent sales, followed by Younger Boomers (21 percent), Older Boomers (21 percent) and the Silent Generation (19 percent). As the age of sellers increased, the share of married and unmarried couples declined and the percentage of single female home buyers increased, from 4 percent among Millennials to more than 17 percent among Boomer and Silent Generation sellers, perhaps due to death or divorce.

Like buyers, older sellers tend to move greater distances, and are more likely than younger generations to move out of the state or region. While younger buyers typically moved to larger, higher priced homes, the data shows a clear trend of downsizing to smaller, less expensive homes among the Older Boomer and Silent Generations.

Typically the older the seller the longer the tenure in the home, while Millennials had been in their previous home for a median of five years, Gen X-ers stayed 8 years, Younger Boomers owned their home for 11 years, Older Boomers stayed for 13 years, and the Silent Generation kept their previous home for 15 years.

The reasons for selling a home also varied among the generations. Younger buyers were more likely to move to accommodate job relocation or desired to upgrade to a larger home. In comparison, older buyers were often looking for a smaller home due to retirement and because upkeep was too difficult due to health or financial limitations, or to be closer to family or friends.

When it comes to negotiating, older sellers are often more willing to reduce their home’s asking price but are less likely to offer buyer incentives such as home warranty policies or assistance with closing costs.

Of sellers working with real estate agents, the study found that older generations of buyers are more likely to use full-service brokerages in which agents provide a broad range of services. While more than two-thirds of Millennials used full-service brokerages, they were more likely than other generations to choose limited service, which includes discount brokerage, or minimal service, such as simply listing the home on a multiple listing service, presumably because they have less equity in their home.

Sellers of all ages typically found a real estate agent through a referral or friend; however, younger sellers were more likely to use the same real estate broker or agent for their home purchase, 59 percent of Millennials used the same agent compared to 42 percent of Older Boomer sellers. Younger sellers typically want their selling agents help with selling the home within a specific timeframe and pricing the home competitively, whereas older buyers are looking for their agent’s help with marketing the home and finding a buyer.

For additional NAR commentary on the home buying habits of Millennials, watch this video.

NAR mailed an eight-page questionnaire in July 2012 to a national sample of 93,502 home buyers and sellers who purchased their homes between July 2011 and June 2012, according to county records and using the Tailored Survey Design Method. It generated 8,501 usable responses; the adjusted response rate was 9.1 percent. All information is characteristic of the 12-month period ending in June 2012 with the exception of income data, which are for 2011. Because of rounding and omissions for space, percentage distributions for some findings may not add up to 100 percent.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

Monday, July 8, 2013

Prices moving up, inventory tight.

Rod Sager

Our local market is reflecting upward trending prices and tight inventory. For buyers this means it is time to jump off the fence and into the market before your home buying dollars are squeezed too tight. For sellers, the time to list could be right now. There is no way to determine how long this upward pricing will continue. We could see extended growth over several years or we could see a top out and flat line next year. There are too many external factors that effect the real estate market to make an absolute assertion. What we do know is that right now we have low prices that are quickly rising and we have very low interest rates. This is a golden moment in real estate where a buyer can lock in a low interest rate for 30 years and take advantage of robust market appreciation. Below are some excerpts from a recent article posted by the National Association of Realtors®.

"WASHINGTON (June 20, 2013) – Existing-home sales improved in May and remain solidly above a year ago, while the median price continued to rise by double-digit rates from a year earlier, according to the National Association of Realtors®."


"Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 4.2 percent to a seasonally adjusted annual rate of 5.18 million in May from 4.97 million in April, and is 12.9 percent above the 4.59 million-unit pace in May 2012."

"Lawrence Yun, NAR chief economist, said the recovery is strengthening and to expect limited housing supplies for the balance of the year in much of the country. “The housing numbers are overwhelmingly positive. However, the number of available homes is unlikely to grow, despite a nice gain in May, unless new home construction ramps up quickly by an additional 50 percent,” he said. “The home price growth is too fast, and only additional supply from new homebuilding can moderate future price growth.”"

"Existing-home sales are at the highest level since November 2009 when the market jumped to 5.44 million as buyers took advantage of tax stimulus. Sales have stayed above year-ago levels for 23 months, while the national median price shows 15 consecutive months of year-over-year increases".

"NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said market conditions today are vastly different than during the housing boom. “The boom period was marked by easy credit and overbuilding, but today we have tight mortgage credit and widespread shortages of homes for sale,” he said.“The issue now is pent-up demand and strong growth in the number of households, with buyer traffic 29 percent above a year ago, coinciding with several years of inadequate housing construction. These conditions are contributing to sustainable price growth,” Thomas said."

"Forty-five percent of all homes sold in May were on the market for less than a month. The median time on the market is the shortest since monthly tracking began in May 2011; on an annual basis, a separate NAR survey of home buyers and sellers shows the shortest selling time was 4 weeks in both 2004 and 2005."

"Single-family home sales rose 5.0 percent to a seasonally adjusted annual rate of 4.60 million in May from 4.38 million in April, and are 12.7 percent higher than the 4.08 million-unit pace in May 2012. The median existing single-family home price was $208,700 in May, up 15.8 percent above a year ago, the strongest increase since October 2005 when it jumped 16.9 percent from a year earlier."

"Existing-home sales in the West increased 2.5 percent to a pace of 1.23 million in May and are 7.0 percent above a year ago. With the tightest regional supply, the median price in the West was $276,400, up 19.9 percent from May 2012."

Monday, July 1, 2013

Tips for Buyers when evaluating an Inspection

Rod Sager

It is highly recommended that a buyer have an inspection completed by a licensed inspector before committing to a purchase. Here in Washington state we have a special form that typically accompanies an offer allowing the buyer to conduct and evaluate an inspection to determine that the house is suitable, safe and in good repair.

The primary purpose of the inspection is to have the house thoroughly reviewed by a professional that uses a standardized method of inspection. The inspector follows a procedure that is designed to make certain "no stone is left unturned". The buyer should use the information obtained in the report to determine several things. First, are there any genuine safety issues or serious defects that must be addressed prior to close? Second, are there issues that may affect the ability to finance the property? These two issues should be the buyer's primary concern. These are the items to ask the seller to remedy. Third, are the items that may be marginal or even defective but do not warrant the risk of launching a torpedo into the deal. It is a seller's market here in Southwest Washington as it is an many markets and seller's control the tempo of deal at the moment.

Buyers that ask for every little detail on the inspection report will likely find themselves looking for a new house over and over again. Inspections are designed to protect the buyer from serious hazards and excessive expenses, not to beat up the seller with the classic nickel and dime items. A notable exception might be a new construction home where the builder is on site and often willing attend to minor details since the expectation on a new home is rightfully higher.

Items that are generally of serious concern are things like, the roof, furnace, serious dry rot, wood destroying pests, etc. Financing a home using a government backed loan such as USDA, FHA or VA can also require some effort by the seller to comply. These loans require that no earth make contact with wood, crawl space vents are clear and secure, roof is in good shape with a 3-5 year life expectancy, no vegetation in contact with the siding, etc.

The remaining items of minor nature on the inspection report can be used as a "honey-do" list of things to tidy up after the buyer moves in. In our market we are seeing rising prices and interest rates. If a buyer crashes his deal on minor items that cost a few hundred dollars or even a thousand, they may very well pay more than that in higher home prices and monthly payments due to those increasing. A price increase of just one half of one percent on a $200,000 home is $1000 and we have seen prices rising at a rate closer to one percent per month over the last twelve months. It can be counter-productive for a buyer to kill a deal over the little stuff.

When evaluating your inspection try to keep everything in perspective. Keep in mind the idea of protecting yourself from exposure to serious expense or danger rather than nit-picking the seller. Look at the big picture before pounding the seller over that loose light switch cover the inspector found. This will help to ensure a smooth transaction and a more pleasant experience for all parties.