Did you know this about West Seattle?

Back in 1888 there were no bridges, no train trestles across the tide flats from Beacon Hill to Pigeon Hill. There weren’t any reliable boats to West Seattle from Seattle. There was all this land with lush forests and stunning views to develop housing for the growing population. In order for the developers to be successful in showing the newcomers this beautiful peninsula they ran into the transportation problem. Therefore, in 1888 the West Seattle Land and Improvement Company, a group of developers and real estate brokers, invested $35,000 in a steam-powered side-wheeler named The City of Seattle. The maiden voyage was on December 24, 1888 with the first regularly scheduled run on Ney Year’s Eve. The ferry ran between the Seattle Waterfront and the West Seattle ferry dock which was just north of where Salty’s is currently located. The ferry brought potential buyers to West Seattle. Sales were slow at first until the Great Seattle Fire; June 6, 1889 sparked the development in West Seattle. And the rest is history.

NAR: Pending home sales rise to highest level in 2 years

Pending home sales increased in March and are well above a year ago, according to the National Association of Realtors.

NAR’s pending home sales index, a forward-looking indicator based on contract signings, rose 4.1% to 101.4 in March from an upwardly revised 97.4 in February. It is 12.8% above March 2011 when it was 89.9. The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First-quarter sales closings were the highest first-quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said.

“The housing market has clearly turned the corner,” Yun added. “Rising sales are bringing down inventory and creating much more balanced conditions ... which means home prices will be rising in more areas as the year progresses.”

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year of examination.

Read the full story via:  NAR: Pending home sales rise to highest level in 2 years

Non Short Sales vs Short Sales in West Seattle

Short sales have been a nightmare to work so some agents avoid them like the plague. The process for buying a short sale could take anywhere from 3 to 12 months ---then not close. This process lowers the demand for short sale homes which increases the demand for the non-short sale homes. The following chart compares Non Short Sales vs. Short Sales for single family homes priced $200,000 to $800,000 in West Seattle.

In the Difference section notice how in the Closed Sales row the Short Sale homes sold for 14% lower than Non Short Sales.  That equates to saving $56,000 on a $400,000 home.  That is a substantial difference.  But perhaps the buyer, anxious to move into their new home, will not end up with the home because sometimes just prior to closing the lienholder ends up not completing the transaction. 

If a buyer has a long time frame to move, loads of patience, a tolerance for jumping through hoops and playing the waiting game they will end up with a good buy.  If not then they should focus on the Non Short Sale homes.

There is some good news because some of the banks have improved the process but it still takes diligence and patience.  The money saved buying a short sale I consider “sweat equity” because the buyer will be sweating through the process and will have earned the equity.

Have you had an experience with a short sale? If so please share your story.

Latest Real Estate Stats for West Seattle

Here is the latest statistics for West Seattle’s Real Estate activity. This chart shows only single family homes in West Seattle. The green bar shows the number of active listings, the blue lines tracks the new listings for each month, the red line represents the number of pending sales (accepted offers) and the blue bar is the closed sales for that month. The market times are down and it is not unusual to receive multiple offers on good homes that are properly priced.  If you have questions on where the market is headed please let me know either here in the forum or email me for a private no obligation consultation.

Why Home Ownership Matters

Some people say we shouldn’t encourage home ownership because some people shouldn’t own homes. That belief misrepresents reality. I think we can agree that not everyone who wants to buy is financially ready. Many people are ready and should be encouraged to buy their own home. The median net worth of home owning families is more than $200,000 compared with about $5,000 for families who rent, according to the most recent data available from the Federal Reserve. People that work hard to buy their first home and begin building equity can, in the long run, be more self-reliant that those who don’t take that step. 

In addition the interest rates, in the 4% range, are at an historical low (see previous post). It is less expensive to buy than it is to rent a home today. Speaking only about the local market here in Seattle now the smart investor/home buyers have returned to the market. There have been more cash sales than any time in my long career which means people with money have sat on the sidelines as the market was in turmoil and waited until the market bottomed out. Now they have returned and are investing cash. Check out the local housing market stats and trends on the 'Local RE Stats' tab at the top of this blog page.

The obvious question is:

If someone is renting, has at least 3.5% of the purchase price for a down payment, has decent credit, and is employed then why wouldn't someone buy a home of their own with such favorable market conditions? What would be a reason not to buy in this market?

Historical Perspective of Mortgage Rates

One thing I find missing from all the talk about real estate values are the interest rates. The mortgage interest rates are volatile at best. In the early years of my real estate career, in the late 1970s, the interest rates hit 18%. That meant that a typical West Seattle home, which cost about $60,000 to $75,000, would have a principal and interest payment of $900 to $1,200. The average price of single family homes in West Seattle that have closed within the last 6 months is $360,000. To put the 18% rate into perspective that same home today would have a principle and interest payment of $5,425!

While no one is expecting 18% interest anytime soon, the interest rate definitely plays big part of the affordability of home ownership. Today’s rates around 5%, give or take a quarter percent, are insanely low.  Let’s take that $360,000 example again at 5% and we find a principal and interest payment of $1,932. When the rate goes up to 6%, still historically low, the same payment rises to $2,158. To approach if from the other direction that means if you qualified up to the $360,000 at 5%, then at 6% you would qualify for $322,000. That may not look like a big deal now but you would have to start to pare down your list of priorities, the things you want in your home.

Sometimes an international crisis can fuel interest rates spikes as in the case of the Iran Hostage Crisis in 1979 (see chart). The chart below is one that I found in my file from 11 years ago and ends at 2001. Notice the chart bottoms out at 6% and we are at an unpredictably low 5%.

Finally, most of the time when prices down the interest rate are up and vice versa. The value of the home is partly due to how much the average buyer can qualify to buy. Almost like a balloon where you squeeze one end smaller and the other end expands. Rate goes up…price goes down. Rate goes down…price goes up. So we have interest rates so low they are off the charts, and prices lower that any of us thought we see locally, and a bright future for Seattle.

Welcome to the Real Estate Forum

Welcome to the Real Estate Forum. It’s about Seattle and West Seattle Real Estate, the current local market, statistical insights, and interesting anecdotes from my experience selling over 400 homes. I’ve lived in West Seattle since 1966 and started selling homes in 1975. I find Seattle and West Seattle’s rich and interesting Northwest history to be a fantastic story that shows us how we evolved. We will have discussions about things important to you and some interesting posts and articles from my sources.

This is a vibrant discussion of ideas. You don’t have to be an expert or agree with me. Just your thoughts are needed.

All Real Estate is Local 

Remember all real estate is local. Listening to the national news regarding the real estate market is like trying to forecast the local weather on a national basis.

·    Do you think we have we hit the bottom of the values here in Seattle? Why?

·    Housing fuels the economy. A study conducted found that when a home sells the  new owners spend 3% of the sales price, on the average, for improvements like appliances, paint, furniture, a new roof, windows, carpets, deck furniture, etc.  Some in Congress want to do away with the mortgage interest deduction on Federal Income Tax Returns. Do you favor or oppose eliminating the deduction?

·   We are in a historically unique period for real estate. Normally when the interest rates are low the prices are up and when the rates are up the prices are down. Currently this market has both low rates, in the 4% range, and the low prices. Would you invest in local real estate in 2012?

Thanks for your imput. Check back here or my Facebook page Windermere Real Estate Jim Biava for others comments.