Sunday Night Stats - King County August 24, 2008
We’re just past the halfway point on the third quarter, and condo prices are getting much lower. Unless we see a major change in the next 5 to 6 weeks, the MPPSF is showing down over 11% from peak At $274 vs. $311. Not a big surprise, as pending stats have been low, so it was only a matter of time before those low numbers in pending status started showing up in the closed sales. Still I wouldn’t be surprised if they bounce up a little by the end of the 3rd Quarter.
Inventory is getting pretty darned flat. For condos the number of properties for sale hasn’t changed much since May. 3rd week of August - 4,082, July 3,958, June 4,049, May 3,953. Pretty much flat for four months in a row.
I’m not even going to talk about pending sales as there is so much junk stuck in there and not closing. For now I’m not counting anything until it actually closes.
King County Condos
2004 - 1Q - 1,694 - $188, 2Q 2,636 - $199, 3Q 2,540 - $196, 4Q 2,176 - $195
2005 - 1Q - 2,066 - $198, 2Q 2,925 - $209, 3Q 2,769 - $226, 4Q 2,266 - $224
2006 - 1Q - 1,956 - $242, 2Q 2.748 - $252, 3Q 2,737 - $269, 4Q 2,217 - $278
2007 - 1Q - 2,042 - $295, 2Q 2,862 - $302, 3Q 2,676 - $311, 4Q 1,618 - $294
2008 - 1Q - 1,258 - $299, 2Q 1,535 - $287, 3Q to date 685 - $274
Residential properties seem to be holding on to value a little better than condos, but still showing more weakness now than they have since late last year. MPPSF is only down 5% - 6% from the peak of $230 to current numbers of $217, and we may not see much of a change in those numbers by the end of the 3rd quarter.
Inventory in the single family markets has flattened out a bit, but only in the last 30 days or so. Some of that is being caused by people renting instead of selling or pulling their properties off market to wait for next Spring.
Residential King county
2004 - 1Q 5,650 - $152, 2Q 9,237 - $160, 3Q 8.737 - $163, 4Q 7,467 - $165
2005 - 1Q 6,402 - $173, 2Q 9,093 - $185, 3Q 9,131 - $192, 4Q 7,301 - $195
2006 - 1Q 5,596 - $201, 2Q 8,248 - $214, 3Q 7,771 - $216, 4Q 6,204 - $217
2007 - 1Q 5,304 - $222, 2Q 7,393 - $230, 3Q 7,944 - $229, 4Q 4,301 - $221
2008 - 1Q 3,640 - $219, 2Q 4,676 - $220, 3Q to date 2,366 - $217
Stats not compiled or published by NWMLS. (Required disclosure)
As is true most years, the prices will start to be better for buyers from now through year end. In the hot markets of the past few years, that only meant that appreciation would slow down. But this year and last year, the prices just kept getting better and better…for buyers that is. If you can wait a year or two, I think prices will be even lower. But if you plan to buy in the next 6-9 months…the next 3 may be better than waiting just a few months longer.
Tracking Homebuyer Activity
Last week an agent said to me, “I have had the same 6 or 7 buyers and sellers for the last 4 months.” Reminded me of a waitress who couldn’t “turn a table” because the same people stayed all night long.
I decided to track homebuyer activity to see how many buyers who have been looking at homes for the last 30 days or so, have purchased one. The little blue box on the doors of homes for sale tells us which agents have shown the property. If you take that agent’s code number and plug it into the MLS, you can tell if that agent is involved in a pending or closed transaction in the same period of time. It’s not an exact science, but let’s see what we can find out. As usual, I’m doing this in real time by tracking the agents as I write the post.
I pulled the records of 6 of my listings and the 56 showings by 48 agents they have had in the last 30 days or so. 34 of those 48 buyers have bought nothing. 2 bought my listings. 12 bought other properties (see below). One of my listings in escrow during the same timeframe was purchased by the neighbor, so that pending transaction had no agent showing. I’m not counting the times I showed the property myself or people who came through during an Open House.
Agent #1 showed the property 3 X in 2 days. If you take the code # of the agent and plug it into the system, you will see that two days later that agent opened an escrow on a property that cost $250,000 more on a similar house nearby.
From that we can assume that the buyer of Agent #1 was weighing the choice of buying a fixer or spending $250,000 more for a similar home assessed for only $25,000 more. It’s not unusual for someone to want a home that needs no work. But spending $250,000 more to get one, is not all that common. Especially one that doesn’t have more bedrooms or more bathrooms or much more square footage and is not in a better location.
Agent #3 showed the property twice and then the buyer purchased a newer townhome on the Eastside instead of a fixer single family home in Seattle. This buyer spent $100,000 less.
Agent #5’s buyer bought my listing in Rivertrail in Redmond.
Agent #16’s buyer bought the house behind my listing in Seattle on a 2,800 sf lot vs. a 5,000 sf lot, listed for $6,000 less. The price differential could have been $20,000 at the time. I have to check the date of the showing vs. the date of the price change and the date the home behind it went into escrow.
Agent #19’s buyer bought a single family home in Downtown Kirkland vs. a townhome in Redmond for almost double the price. (This one is more likely a different buyer with the same agent. Most of the agents listed as their buyer buying “Nothing” are agents who sold nothing at all, so it’s easier to be almost positive. Though those 34 buyers could have bought something with a different agent, that’s not likely given the short timeframe tracked.
Agent #21s buyer went further south and bought a single family home instead of a condo for about $20,000 more.
Agent #22s buyer bought an “income qualified affordable ARCH” condo. $20,000 more for twice the size and 1 additional bedroom.
Agent #24s. buyer bought a new townhome instead of an older craftsman that needed updating.
Agent #25s buyer spent $100,000 more and bought a house that needed less work.
Agent @26s buyer bought a condo in Capitol Hill vs. a fixer home in Green Lake.
Agent #28s buyer bought a newer home further away from Microsoft for $25,000 more (Newcastle)
Agent #36s buyer bought a new townhome (instead of an older SFH) further north in Seattle for $100,000 less.
Agent #37s buyer went to Shoreline vs. Green Lake and spent $100,000 less for a house that needed less or no work.
Agent #40s buyer bought my listing in Bellevue.
While I don’t intend to replace OBEO as “the expert in buyer behavior”, being able to track what buyers are actually doing, is a useful tool. This ability is only recent, as NWMLS just added the “selling agent” code ID to the data entered when registering a pending or closed sale. It was the first (and only) thing I complained about back in 2004, and the change took place in June or July of 2008. Many could not see the need to post the Buyer Agent info when recording a sale.
This feature offers an enormous advantage to our seller clients, who can now track via their listing agent, what the buyer did or didn’t do after seeing their home.
For listing agents, just write down the LAG# (agent code) of agents who show your listings. Then you can track to see if they are putting anything at all into escrow…or not. By seeing what the buyer chooses, you can determine if you need a price change, or if you need to make some condition improvements to your current listings. There’s not much you can do if people don’t want a fixer and choose a new townhome instead. So before reducing the price based simply on time on market, assess the actual situation as carefully as possible.
Interesting side issues:
1) Three of the agents are no longer agents at all, so I can no longer track them. Showed my listing and then quit the business altogether 
One of the agents’ buyers bought a Downtown Condo that had been on market for 4 1/2 months with no price reductions. Knowing WHY buyers are not choosing the property, by tracking their movements, can help owners decide whether you need to wait it out at the same price, or reduce the price.
Don’t buy into an automatic reverse auction of reducing the price every X days. Track what those buyers are doing, and plan and change your strategy accordingly. A lower price isn’t going to turn a fixer craftsman into a new townhome. Sometimes waiting longer for the right buyer IS the answer. But if people are buying similar homes nearby for less…then a price reduction is in order.
Attack of the Killer Assessments August 23, 2008
It was a warm & lovely summer evening… Our hapless hero goes through his nightly ritual of sorting the junk mail from the bills when stumbles upon his annual “Official property value notice” post card from the King County Assessor.
Before I actually looked at the card, I thought, this shouldn’t be too bad. The local real estate market has cooled down a lot in the past year. My appraised value should be flat (maybe even lower). Zillow thinks my house’s value has fallen by about 10% this past year. Cyberhomes thinks it’s fallen by about 9%. Eppraisal & Realtor.com doesn’t give me a historical chart, but their value ranges are realistic.
So I gaze upon my white post card of doom and see the following numbers…
|
APPRAISED VALUE |
||
|
OLD VALUE |
NEW VALUE |
|
| LAND |
123,000 |
230,000 |
| BLDGS, ETC |
413,000 |
360,000 |
| TOTAL |
536,000 |
590,000 |
I then think, WTF? Why in the world has my land value gone up nearly 90%? Why is my total property value 10% higher than last year, despite the fact we are in a down market? Is the assessor catching up to the market? Did the assessor really blow it this badly in years past? Is this a work of comedy & horror to rival the cult classic of good garden vegetables gone bad?
So, I call the King County Assessor’s office, and they explain to me that the market sells it as one piece, but the assessor must value the land as if it were vacant. After the land value is determined, they determine the total value of the property. Then the land’s worth is subtracted from the total and the remainder becomes the value of the house. They tell me where to go to view the area report for the Issaquah Highlands if I want find out more about how they determined my property’s value.
I read the report and discover that the base land value of single family home in the Issaquah Highlands is $240,000 and that the appraised land value for Area 75 is about 56.7% higher than it was last year. OK, but it still doesn’t explain why my land value is nearly 90% higher than last year. Unless weeds are considered a land improvement or the definition of a square foot has changed in the past year, I still have no idea how they came up with that figure.
I usually read the Seattle Times, not the Seattle PI, so I didn’t see this coming! However, it’s nice to know, I’m that the only one confused about the crazy assessments this year. I haven’t decided if I’m going to get out my pitchfork and storm the assessor’s office yet, but I do feel the need to understand how they came up with their numbers. I’m sure it doesn’t help that Probably & Statistics for Engineers, wasn’t among the classes at school that improved my GPA when I was going to Cal Poly.
And if any program managers from Zillow are reading this blog post - there has to be a cool new feature idea in this experience somewhere. Your web site is very useful helping me buy or sell a home, but I really have no idea if land values really are what the county says they are. Besides, I pay property taxes on a twice a year basis, but I’ve only sold a home once in the past 10 years. Every time somebody’s assessment changes you could get more site traffic. Why can’t generating a Z-assessment petition be as easy as getting a Z-estimate? Just saying, there’s an opportunity here…
Predatory Upfront Loan Modification Fees August 21, 2008
I’m troubled by a trend that I’m seeing. Recently I’ve noticed that mortgage brokers/loan originators have become interested in learning about loss mitigation techniques. When I ask why, they say that they’re hearing there’s good money to be made doing loan modifications. What? Wait a second. I thought loan modifications were done by the lender for free.
More and more spam is popping up in my spam bin advertising loan modification services, offered by loan originators so I decided to call one of these LOs today after sending an email late last night asking for more information and receiving no reply.
This particular person goes by the title of ”mortgage planner.” On her website, she advertises a wide variety of mortgage products including the pay option ARM and the hybrid ARM (are those even available anymore?) but there’s nothing on her website about loan modifications. None of the staff bios show any experience in doing loan modifications. Here’s what I found out. The upfront fee charged to the homeowner is $3500. But the LO assures me that all the work is handled by attorneys, she says. The borrower’s up front fee is placed into escrow. If a request for loan modification is accepted by the lender for loss mitigation (statistics were offered that 93% of loans are being modified) the full fee is due. If the loan does not get modified, $2,000 is refunded and the remaining $1500 is not. I asked the LO why a homeowner wouldn’t just work directly with an attorney. She said that she works with a network of attorneys with a high loan mod approval rate and homeowners are always free to hire their own attorney and not work with her.
I asked her how much of the $3500 goes to the attorney and how much of it she gets to keep. Her response was, “why are you asking me that?” To which I replied, “because if the attorney is doing all the work, then I’m wondering how much of that fee is going to you.” She said “Well I work with the clients. I put a package together and follow up with the lender.” I said, “but a few minutes ago you mentioned that everything is handled by attorneys.” Of course at this point the conversation has turned a tad bit adversarial and she starts to probe deeper into my true intentions. My intentions are only to get closer to what’s really going on here. I need to know if this sort of gig is something that is a viable alternative for Realtors to know about when counseling homeowners in financial distress. My intentions are to be able to help other loan originators evaluate whether receiving a referral fee on a loan modification is going to get them into trouble. If I were to guess, I’d say that the LO earned $2,000 for a successful loan mod and the remaining $1500 went to the attorney. There are forums out there confirming my guess.
In some states, including Washington State, Mortgage Brokers and their LOs now owe fiduciary duties to consumers. Fiduciary comes from the Latin word fiducia, meaning “trust.” A fiduciary is a person who has the power and obligation to act for another under circumstances that require complete trust, good faith and honesty. Fiduciaries are obligated to avoid self-dealing and conflicts of interests in which the real or potential benefit to the fiduciary is in conflict with the best interests of his or her client. All fees earned must be disclosed to the consumer. The fact that this mortgage planner/LO felt uncomfortable discussing his portion of the $3500 and the actual work performed is a big red flag.
We must realize that not every homeowner is going to be as aggressive as I am with LOs over the phone.
Consumers reading this blog:
Loan modifications are performed by a lender with no fee to the homeowner. HUD-approved Housing Counseling Agencies perform loss mitigation/loan modification services for free. These agencies are supported by our tax dollars.
I suppose the argument is this: “Well the loan servicing departments are really busy and by paying our $3500 fee, you have a 93% chance of getting your loan modified.” But doesn’t the homeowner still have that same 93% chance going at it alone or with the help of a housing counselor?
If I had $3500 to spend, then I think I’d rather spend the whole $3500 on legal counsel, instead of just $1500.
Loan originators, a fee for services rendered is fine, but what are those services being performed? This particular person shows zero experience in loan modifications and admitted to me that the attorneys are doing all the work. Is “gathering papers together” worth $2,000? A fee earned that is not commesurate with services rendered has been catagorized as an illegal kickback via RESPA’s Section 8. Loan Servicing companies are also subject to the provisions of RESPA. All lenders are subject to RESPA whether or not the LO owes fiduciary duties to consumers. Any amount over what’s considered normal and customary for services rendered is considered a junk fee and subject to challenge.
Sigh. I suppose we need to consider that we’re coming out of a mortgage orgy where LOs actually did just gather together some papers, threw them on the processor’s desk, and picked up a fat paycheck. Why wouldn’t they believe this could be their ticket back to the good old days?
Loan Originators, before you begin earning these referral fees for basically doing jack squat and handing the file over to an attorney, consider what would happen if the homeowner did not feel that he or she was well served.
Your regulator ends up with a phone call, which turns into an investigation. Perhaps you’ll end up having to refund all those fees back to the consumer. It could happen.
Loan originators, my advice is to refer your financially distressed homeowners to legal counsel and free HUD counselors. Loan modifications are performed free of charge by lenders.
As a fiduciary, is it possible to justify charging anything above zero when you know free services are available for your client?
Okay all you banker types. Help me analyze this trend. If banks/servicers are offering upwards of $3500 to outsource loss mit/loan mods, that can mean several things. It surely means that a large percentage of these people who are receiving a temporary interest rate freeze on their ARMs will be back in 3 to 5 years with their hand out again, asking for another loan mod; IF they even make it that far. 40% of recent loan mods have already re-defaulted. Random, desperate loan mods without common sense underwriting means we’re just pushing this whole mess further down the road, delaying the eventual recover until many years into the future.
Apparently one of these companies is coming to town next week to sell this system to a room full of LOs. They’re charging LOs a pretty hefty set-up and monthly fee to participate in their referral program. Someone is definitely getting rich quick off of desperate LOs.
Photo Synth will change real estate August 20, 2008
Remember how we were once blown away by the amount of information on the web? The number of facts, rumors, discussions, and, well, the shear number of words that were generated daily?
The textual web is fascinating, but it’s yesterday’s news. The innovation now is the visual web. It’s already begun with Google Street View - you can look out the window of a virtual car on nearly every street in a metropolitan area now. Next up? PhotoSynth. We saw previews of it two years ago, but (holy smokes!) it will be real in 24 hours.
Photosynth takes overlapping photos and constructs a pseudo 3D scene out of them. More images: better scene. An agent could take 400 photos in a house and instead of virtual tours (or annoying video tours), users could walk themselves through the house.
I can only imagine it will get more powerful. Add some more horsepower and they could create scenes from video. Add some more horsepower and they could let you travel through time in a square - through all of the previous users “synths.” You’ll be able to wander off of Google’s Street View and into someone’s yard and, if they’ve uploaded photos, into their home. Creepy, but cool.
I will be very excited to use it. Once they’re “cool enough” to support my operating system. What is this, 1999?
no, you aren't
Watching trends in the daily market watch of the MLS
I’ve been keeping an eye on some of the daily trends in the MLS and have noticed for several weeks now that price reductions have now outnumbered new listings on an almost daily basis. In past years, when almost all houses were selling fairly quickly, we noticed that a small percentage of houses required drops and there was usually a decent number increasing their prices.
Now, it seems that as days on market have increased for many sellers we are finally getting that reality check in place that was needed. Granted, it does seem that the majority of these price drops are in the outlying areas of our MLS region, but the inner-city urban spots are not without their own new reality.
What I like right now is that we’re getting a nice balance of buyer and seller activity, which, for my own personal business/team, means that we’re likely going to be growing our business over the next year or more with some very nice results.
Sold, Sold and Sold again August 18, 2008
One of the best ways to find accurate data as to home prices and appreciation levels is to find homes that have sold a few times recently, that have had no upgrades since the time they were built.
Sold New on 3/30/93 for $210,000
Sold again on 2/27/03 for $349,300
Sold again on 7/8/05 for $466,000
Sold again on 6/25/08 for $540,000
Appreciated by 66% in the first 10 years.
Appreciated an additional 33% from 2/03 to 7/05
Appreciated an additional 15.8% from 7/05 to 6/08
No granite countertops or stainless steel appliances. No upgrades except maybe some updated paint colors. A run of the mill 2,300 sf four bedroom 2 1/2 bath home in a good school district.
It was on the market for 75 days or so and had a $50,000 price reduction before it sold for $10,000 to $15,000 less than that. Would it have been worth closer to the original $600,000 list price if the market hadn’t slowed down? Probably.
Killer Views and Dog Poop - Short Sale
Given prices in the Seattle Area have not dropped to the extent of most of the Country, people wonder why there are some deep discount short sales here. Mostly those that have a deep discount are in worse shape than when the current owner purchased them.
Remodels gone bad…very, very bad. If you know the house below, please don’t mention where it is or the address in the comments. I can’t “advertise” another agent’s listing, but wanted to give you an idea of what a house looks like that will likely sell for $200,000 -$300,000 less than what is currently owed on it.
Often the work being done is substandard, in this case likely because of all of the beer being consumed while doing the work.
Often you will see a lot of new materials, like the travertine above, but partial and poor installation. I think there were more broken pieces of travertine strewn about than there were full tiles laid.
Still, the view considerations suggest it may be a worthwhile project for someone, especially an owner occupant, if it sells close enough to lot value.
But rarely does anyone but an investor want the house with Killer Views and piles of dog poop.
Twitter is AMAZING August 16, 2008
Over this past week, I’ve had the misfortune dealing with cable (Comcast) being down and just today, my email being out (an issue with Network Solutions). Both times, I vented with 140 characters (or less) on Twitter. Of course, I had to use my Treo to whine about Comcast. But what happened in both cases really surprises me. Apparently these big corporations have their own “David G’s” out there with their own Twitter profiles and alerts set up to address issues brought up on the internet.
Here’s my Tweet:
pulling out my hair…network solutions email seems to be down…argh! No emails for me.
netsolcares @mortgageporter Hi this is Gerry from Network Solutions. I’m sorry your having issues. If you’d like to contact me I’ll see what we can do
I just got off the phone (after holding for over 11 minutes) with Gerry @ Network Solutions and they narrowed down what my issue was (too technical for me to explain) and the good news is, everything is back up and working. And it’s the weekend. I’m amazed.
The Comcast response and issue was very similar. A “tweet” from me saying Comcast is out…no email or internet and this reply from “Comcast Scott” within moments
comcastscott @mortgageporter how often has this been happening? Can we help
Along with this one
comcastcares @mortgageporter Keep us updated
and
comcastscott @mortgageporter glad to help! Keep those tweets coming
By the way, if you have Twitter and you find your Comcast or Network Solutions services not working, you can always tweet these fella’s…they react quickly. I am impressed and would have never pictured large corporations utilizing social networking this way.
So for all of you who are not utilizing Twitter because you think it’s a fad, I encourage you to check it out. It is what ever you make it. I’ve found it to be real useful for communicating what I doing during the day, like providing live rate quotes, in a consultation, writing a blog post, etc. And I’ll post something “non-business” every once in a while like what I’m cooking up for dinner.
If you do sign up (it’s free and easy to do) please “follow me” or at very least, send me a tweet!
Mortgage Rates on a Summer Day & Adverse Market Pricing August 15, 2008
How lucky am I? It’s a beautiful sunny 85 degrees in Seattle and mortgage rates, for the most part, are pretty much the same as what I posted last week (as of 1:00 today). That makes for a real easy post!
Well…almost. As I price out mortgage rates with the various resources we have, there is quite a difference. Normally, banks are all within a close range of each other. However, since Fannie and Freddie are adjusting their LLPA (adverse market pricing) effective on loans purchased by Fannie beginning October 1 for Fannie, Freddie follows in November), some lenders are all ready factoring in the price hits. Others are not. Right now, if you’re not working with a Correspondent Lender or Mortgage Broker (where they shop rates for you), it pays to shop the various mortgage banks. As we draw closer to early September, we’ll see everyone pull closer together and less of a divide.
Here is the Adverse Market Delivery Charge (this is separate from the credit score based pricing) on loans purchased from Fannie on October 1, 2008 or later which are to price (not rate) for mortgages with terms greater than 15 years:
Loan to value 60% or lower
Credit score 700 or higher: 0.25% add to price (improvement)
Loan to value 60.01 - 75% (no changes w/Fannie’s LLPA, check out my previous post for the hits. Fannie added more loan to value brackets for their adverse market pricing)
Loan to value of 75.01 - 80%
Credit score 720 -739 = 0.25% price hit
Credit score 700 - 719 = 0.75% price hit
Credit score 680 - 699 = 1.00% price hit (this is approx. 0.25% to rate on average)
Credit score 640 - 659 = 1.75% price hit
Credit score 620 - 639 = 2.75% price hit
Loan to value 80.01 - 85%
Credit scores 720 and above = 0.25% price credit (this is not a typo. The higher ltv has better pricing than under 80% if you compare above–yes the borrower will have private mortgage insurance…but…).
Credit scores 680 - 719 = 0.50% price hit
Credit scores 660 - 679 = 1.50% price hit
Credit scores 640 - 659 = 2.00% price hit
Credit scores 620 - 639 = 2.75% price hit
Loan to values greater than 85%
Credit scores over 720 = no price hit
Credit scores 680 - 719 = 0.25% price hit
Credit scores 660 - 679 = 1.00% price hit
Credit scores 640 - 659 = 1.50% price hit
Credit scores 620 - 639 = 2.25% price hit
FHA mortgages will continue to become more and more attractive as the conforming guidelines continue to be challenging and the loans are becoming more expensive. Any one considering obtaining a mortgage should make sure that their loan originator is FHA approved (check out HUDS approved lender list)–even if the borrower doesn’t think they’ll need an FHA mortgage. It may prove to be a better loan and odds are a loan originator who is not able to legally provide FHA financing will not suggest you seek out a loan originator who can provide FHA loans.
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