April 2009 Archives

Armchair real estate enthusiasts will revel that real estate information is now even easier to get thanks to the new Zillow Real Estate iPhone application. It's amazing that a person can now drive around their favorite neighborhood and see the prices and status right on their phone. They can look up a house value before going to a dinner party, ON THE WAY to dinner.

It's impossible not to acknowledge this leap. Agents who don't embrace this will be left out. If you are a seller- you better ask if your agent uses all web-related means necessary - not just the MLS - to sell your home. It also becomes critical that the Open House feature be used on the MLS. Otherwise the DIY-ers won't know about your Open House unless they wander off and see your signs (they'll be too busy looking at their phone to see any real estate signs!)

I have found that many people are confused by the numerous terms and acronyms in the world of "Green" real estate.  So, every few days I will post a new term & definition in the world of "Green".

Let's start with a common one these days in real estate (especially new construction): Built Green

Built Green was developed by the Master Builders Association of King and Snohomish Counties.  Developed in partnership with King and Snohomish counties and the city of Seattle. Through Built Green, builders can certify their homes based on features of their project, with a rating system of one to five stars.  Five stars indicating the highest level of "green" achieved.  Starting at four stars, the project must be certified by an independent party.  One to three stars are based on builder provided information.  The MBA uses checklists to help builders determine their rating or to plan for a specific rating in the design phase.

The Seattle area has many builders working within the Built Green parameters.  A great example of a builder doing it right is Greenleaf Construction.  Jim and his crew do amazing work.

Although loan modification for home mortgages may be complicated, it may help many of us get through this slowdown. Here are some key facts about the federal loan modification/refinancing program Making Home Affordable that can make the task of applying for modification or refinancing easier. These are the complete guidelines.

 

A new FICO Website helps borrowers with the federal government's Homeowner Affordability and Stability Plan focused on owners with mortgages backed by Fannie Mae and Freddie Mac. Other lenders may be offering assistance through this plan. www.nytimes.com  

 

The Washington Legislature took steps last week to help reduce foreclosures by setting aside $250,000 for a statewide program to help borrowers and lenders work out modifications, refinancing or other arrangements.

 

The Obama administration has updated the Making Home Affordable program this week by making 2^nd mortgages eligible. The Treasury Department also updated the Hope For Homeowners program offering new incentives to lenders.

 

All of these programs will have a positive effect on Seattle Real Estate as we make our way out of this sluggish market. 

If you're stuck in the quandary of, "Should I buy or should I rent?" there are a number of things to consider.  Such considerations may include current interest rates, how long you plan to stay in the home, and what not only the real estate market is doing, but what the rental market is doing as well.  A terrific website I found through The New York Times does an amazing job of running the numbers:  http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?_r=2#

Plug in the relative numbers: rent, purchase price, down payment, interest rate & annual property taxes (figure about 1% of the purchase price) and the program will pull up a timeline showing you at what point it pays off to have bought.  You can play with the home appreciation rates and rent increases to see how they affect the outcome of the numbers.  While we can't say for certain what will happen with the Seattle real estate & rental markets, we can look at how we have done historically and we can watch day-to-day to see what the current trends are.  The real key is that information is knowledge -- get as much of it as you can.  

Imagine, if you will, somebody you know who is not very good at handling money. In fact this person is absolutely terrible at money management and investing and has finally done great damage to himself and others because of bad planning, bad decision-making and greed.

We all know at least one person like this, a family member perhaps, or a friend or co-worker. This person has a record of foolish behavior and anyone who knows her or him could see this coming. Got that person in mind? OK.

Now, if you had a large sum of money, would you give or loan it to that person? Particularly in these times? You wouldn't, right?

We would not do it, even in this individual, small-scale case, and expect a change in behavior or more importantly, in results.

But, our congressional leaders and financial agency heads are doing just that, allowing the very people and businesses who produced the breakdown of the global financial system to benefit from grants and loans of trillions of our tax dollars. What the agencies and businesses are doing will not benefit most of us personally, will benefit an elite few greatly, and will cost us, our children and our grandchildren enormously.

Unlike with our  foolish friend above, we have no say in the matter and the giving of money will happen, and in our names.

The way out of this mess? I believe that those people who have worked in the real estate business in good faith over many decades, who have gained the experience and developed the expertise to really explain to the public how to create wealth and security, these people should be part of your life.

We at Lake and Company Real Estate are such people. Please join in on our blog, give us a call or drop us an email. We have the expertise and ideas to move our clients forward. Really.

MSNBC today posted a story about a local couple who wanted to sell their condo to move into a house, but was hesitant to sell now because their condo had lost value since the peak in 2007. That is, until they did the math and realized they are actually better off now, than they would have been 2 years ago.

It's a simple argument: everything went down with the market by about the same rate, but in absolute terms the more valuable properties lost more. Assume your current home was valued at $400,000 in 2007, and lost 18% of it's value since ($72,000). The house you want to upgrade to was $600,000 in 2007, it also lost 18% of its value ($108,000). By upgrading now, instead of 2007, you'll get $72,000 less for your current home, but you also have to pay $108,000 less for your new home, so you are $36,000 better off now than you would have been in 2007.

This is a simplistic example. Homes of all types, price ranges, and neighborhoods, did not decline at the exact same rate, so your mileage may vary, but the general principle holds true. The more valuable homes lost more in absolute dollars. So in general, if you are upgrading, now is a better time than 2 years ago.

And the differential in decline rates between home types, or neighborhoods, may very well be in your favor, again especially if you are upgrading.
Consider the couple from the MSNBC story again. They were upgrading from a condo to a single family house. According to Northwest Multiple Listing Service data reported earlier this month, the median sale price for transactions closed in March was down 15.4% from March 2008 or single family houses, but only down 8% for condos for the same periods. So they got a double upgrade benefit, once for upgrading in price range, twice for upgrading in home type.

Bottom line, if you are  thinking about upgrading, don't fret about what your current home could have fetched in 2007, you are very likely to be better off by having waited until now.

Finally there are clear and understandable guidelines to the first time homebuyer credit.  Thanks to the IRS (yes the Internal Revenue Service) there is a very nice Q & A page regarding the 2009 first time homebuyer tax credit.

Q. What is the credit?

A. The first-time homebuyer credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. For homes purchased in 2008, the credit operates like an interest-free loan because it must be repaid over a 15-year period.

The credit was expanded in 2009 for homes purchased in 2009, increasing the amount of the credit and eliminating the requirement to repay the credit, unless the home ceases to be your principal residence within the 36-month period beginning on the purchase date.

Q. How much is the credit?

A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more.

Q. Which home purchases qualify for the first-time homebuyer credit?

A. Any home purchased as the taxpayer's principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before December 1, 2009, to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home.

Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return.

Find more FAQs here.

 

The nation's recovery plan has dumped hundreds of millions of dollars into the economy. Right or wrong it's hard for me to imagine that the government will fail, that as a nation we've doomed ourselves into Third World status. So I have to assume that our financial system will recover and the national economy will see growth once again. And what will happen once the TARP and other stimulus monies trickle down to the masses?

A few people, who want an immediate fix, are screaming about deflation, but most experts predict inflation will be the result of this new money. Prices will go up and interest rates will go up. Incomes will lag as businesses will have a large pool of the unemployed to draw from.

Suppose you could buy a home now but are considering renting another year or two, just to make sure. You have good credit, 20% to put down and a job.

Interest rates right now are less than 5%. You offer $400,000 on a home, put $80,000 down and end up with a PITI mortgage payment of about $2,100.

When interest rates go up to 7%, the PITI will be just over $2,500.

There are lots of calculators online that figure in appreciation, tax implications, and so forth. But what will that $400,000 home cost in two years?

 

Happy Earth Day.  There are many small things you can do around our home to save a few dollars and live a little more lightly.

1) Install a programmable thermostat.  A programmable thermostat prevents the furnace or heating system from running when it is not needed.  You can program the thermostat for a lower temperature while you are away from home or cuddled under your blankets at night.  Prices start at around $50.00 and are an easy do-it-yourself project.

2) Drink tap water.  Go ahead grab one of those stainless steel water bottles and fill it up.  Our tap water in the Seattle region is just fine.

3) Use eco-friendly paint.  Traditional paint options contain VOC's, volatile organic compounds, that release harmful pollutants into the air.  The options in low VOC paints are now numerous and most major paint retailers now offer them.

4) Clean the lint screen in your dryer.  The lint collects in the filter and prevents air flow in the drying process, forcing your dryer to work harder.  Clean out the lint trap and let the air flow.  It is also a safety issue, as it can be a fire hazard.

5) Fix your leaky tap.  A small drip from your leaky tap can waste 3 gallons of water a day!

A few small (and easy) changes can make a difference. 

Newgeography.com released it's annual ranking of best cities for job growth.  'Seattle - Bellevue - Everett' area ranked sixth in 'Large Cities'.  Texas took the top five spots on the list with Austin, Houston, San Antonio, Fort Worth & Dallas.

The article is by Michael Shires:

This year's rankings continue the methodology used last year, which emphasizes the robustness of a region's growth and allows the rankings to include all of the metropolitan statistical areas for which the Bureau of Labor Statistics reports monthly employment data. They are derived from three-month rolling averages of U.S. Bureau of Labor Statistics "state and area" unadjusted employment data reported from November 1998 to January 2009.

The data reflect the North American Industry Classification System categories, including total nonfarm employment, manufacturing, financial services, business and professional services, educational and health services, information, retail and wholesale trade, transportation and utilities, leisure and hospitality, and government.

"Large" areas include those with a current nonfarm employment base of at least 450,000 jobs. "Midsize" areas range from 150,000 to 450,000 jobs. "Small" areas have as many as 150,000 jobs. One community in last year's top small MSA group grew enough that they are now considered a midsize MSA: Charleston, WV.

This year's rankings use four measures of growth to rank all areas for which full data sets were available from the past 10 years -- 336 regions in total. The Bureau of Labor Statistics, however, no longer reports employment detail for MSAs with employment levels less than 30,000 in its monthly models, resulting in shifts as MSAs were dropped. As a result, this year's rankings can be directly compared to the 2008 rankings for MSAs for the large and midsize categories, but there are some adjustments needed for year-to-year comparisons in small MSA category. In instances where the analysis refers to changes in ranking order, these adjustments have been taken into account.

The index is calculated from a normalized, weighted summary of: 1) recent growth trend: the current and prior year's employment growth rates, with the current year emphasized (two points); 2) mid-term growth: the average annual 2003-2008 growth rate (two points); 3) long-term trend: the sum of the 2003-2008 and 1998-2002 employment growth rates multiplied by the ratio of the 1998-2002 growth rate over the 2003-2008 growth rate (two points); and 4) current year growth (one point).

Shaun Donovan, the new secretary of the Department of Housing and Urban Development, has his work cut out for him.  But he did clear up his opinion on one thing that many of us felt would be unfair.

When asked "We're facing a tidal wave of foreclosures. How do you decide whom to help?"

Donovan answered "We can't nor should we help everybody. We're going to help people who live in their homes. This is not help that we're providing to investors or flippers."

Good answer.  Speculators and real estate gamblers should not be the focus in HUD's attempt to help clean up this lending mess.

Read the article here...