Page not found – Real Estate https://www.paulisenburg.com Real Estate Wed, 08 Nov 2023 19:05:25 +0000 en-US hourly 1 Agent Compensation Court Cases https://www.paulisenburg.com/2023/11/08/agent-compensation-court-cases https://www.paulisenburg.com/2023/11/08/agent-compensation-court-cases#respond Wed, 08 Nov 2023 15:51:49 +0000 https://www.paulisenburg.com/?p=28355 Many of you have likely been hearing about a large class-action lawsuit and decision that came out last week impacting the Real Estate industry and brokerage fees. The current case is the Sitzer/Burnett case but there are others filed and brewing in the background. I wanted to offer some background on this case and the […]

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Many of you have likely been hearing about a large class-action lawsuit and decision that came out last week impacting the Real Estate industry and brokerage fees. The current case is the Sitzer/Burnett case but there are others filed and brewing in the background. I wanted to offer some background on this case and the gist of the issues in all of them.

At the core of the issues is the past requirement that most Multiple Listing Services—the databases of homes for sale in a general area—had that Sellers had to offer some form of compensation to the Buyer’s agent to put their homes in these databases. Our local MLS and many others around the country stopped this practice almost 5 years ago. The intent was for Sellers to benefit from exposing their home to all agents and brokerages in the area so that all agents and their prospective buyers could know about all homes for sale in the area at the same time.

In historical and more normal market conditions, this system has worked very well. Seller’s homes got maximum exposure to buyers anywhere and everywhere. Larger brokerages wouldn’t have an advantage by hiding properties from smaller brokerages. The requirement for offering compensation was so that all buyer’s agents would know what compensation they’d receive for submitting a successful offer to a home seller. This compensation was offered under what was labelled cooperative compensation. A home seller hires me to represent them. My office and I have a fee we charge to represent you and part of that fee we offer and agree to pay to the office/agent that brings the successful buyer’s offer to us.

The lawsuits are arguing that this cooperative compensation or ANY agreement that requires a home seller to pay ANY money to the Buyer’s agent is an undue burden on home sellers.  They claim this raised the costs to sell or buy a home. Their argument is that the only compensation to the Buyer’s agent should be paid by the Buyer. The jury, judge and Plaintiff attorneys all failed to recognize, VA buyers can’t pay a Buyer Agent fee; it’s against lending regulations. Moving on, their theory is that if Buyers and Sellers had to each pay their respective agent fees, then Real Estate fees would be lower. As is the case for many aspects in life, theories can make sense, but in practice, they often fall short of the best option or solution.

Home sellers have always been allowed to sell their homes on their own—For Sale By Owner, or by numerous variations of limited agent assistance or representation, and with various offers of compensation to agents and buyers. Historically these are utilized about 7% of the time; even less when you look into the details of many of these sales. If Sellers could lower their costs, why is this option so under-utilized? Because exposure to a wider market benefits the Sellers. Similarly, Buyers have also been allowed to hire an attorney, or more recently an agent, to find them the home they want and pay their attorney or agent an agreed upon compensation. It’s not been a normal practice for Buyers as this additional cost is often prohibitive and limits Buyer’s abilities to buy the home they want. Sellers and Buyers know they both benefit with exposure to the marketplace and quality guidance from Agent representation. So how do we solve the who’s paying who question? It seems these court cases want to stop our current practices without posing any equitable solutions.       

So why all the litigation flare-up with a potential $5B+ in damages against the National Association of Realtors and several National Brokerage Companies? It’s a bit grey on the why or why now, but mostly it seems some home sellers are claiming either they didn’t know they were required to pay or didn’t feel they should be required to pay these fees. Their logic is, “I didn’t know this Buyer’s Agent, by definition they are the Buyer’s agent, this agent didn’t DO anything for my benefit, and therefore I shouldn’t have to pay them anything”.  They claim that they weren’t told of this requirement to pay and had no ability to negotiate the amount of this payment.

There are several parts to this logic that I find troubling and disingenuous. First, many MLS systems across the country, including Washington, have stopped the requirement to offer Buyer Agent compensation, but in the states where the class-action suits are filed, it seems they did have a requirement of offered compensation to be in the MLS system. This requirement will now be removed across the country. My next issue is with the Sellers claiming a lack of knowledge in agreeing to pay a Buyer Agent fee, and their options on what to pay. With 37 years of experience in this field, I’ve sat at enough desks, tables, counters, screens and phone calls to tell you a discussion with Sellers on real estate fees are always a point of conversation; not necessarily a point of conflict but always a point of education and discussion. Why a home seller would want to pay a fee to a Buyer’s agent and how much this fee should be is a normal topic of conversation. Home Sellers don’t expect me or my brokerage to know EVERY buyer that may have an interest in their home. They hire me to expose their home to the world, the widest possible audience I can, including all licensed agents in the area—or around the world these days. Most home sellers also know that removing barriers for a potential buyer is a wise decision. Lowering a Buyer’s cost to get a Buyer’s offer on their home is often a wise decision. But why would any other agent want to sell your home if they don’t know if or what they might receive in compensation? If the buyer can’t afford the home and the fee for the Buyer’s agent, the Seller loses out on a potential sale. That’s bad for Sellers and Buyers, but a solution is available. A Seller could pay the Buyer Agent an acceptable fee and put the sale together.

These lawsuits came up during the steepest rise in home values in history. Most areas of the country were seeing 15-25% per year property value increases. We’ve had more generations of buyers in the marketplace than ever before and more demand for homes as our inward immigration flow brought more people into our country. Combine this demand with the decline of home building from 2007 to the present and we find ourselves with the lowest inventory of available homes and highest demand ever—in almost every City and region of the country. With all of this demand, did a home seller actually have to offer to pay a Buyer Agent fee? “Couldn’t I have just said NO?” Seems logical, except for the MLS rule mandating the offer of compensation. Let’s take a quick moment to understand this “rule’s origin”.

MLS systems started back in the 1960’s to 1970’s in most parts of the county. As mentioned earlier, the intent was for equality of access to information. Not sharing information about all homes in all areas, as happened prior to most MLS formations, led to inequality of access to information and homes. The MLS and Realtor Code of Conduct and Ethics rules sought to eliminate this. Anyone, anywhere, should be able to know about any home, anywhere and be able to buy it, if they have interest and ability to afford it. Simple and straight forward. With this new open sharing of information, Sellers would benefit from increased exposure of their properties to agents and buyers. This voluntary joining to the MLS for this increased exposure came with a cost—the agreement to tell agents what they’d receive for bringing a ready, willing and able buyer with a successful offer to a Seller. Historically all agents were considered agents or sub-agents of the Sellers, as they were the one’s paying the fees, so the MLS and NAR rule stated what was the practice—Sellers pay all the agent fees for a home sale for the benefit of more exposure to the brokerage community and increased buyer awareness. Buyers benefitted and so did Sellers. It has been a common practice, even as recently as the 1980s, for Seller’s to offer a higher compensation fee to the agent bringing the buyer/offer, than the agent/agency the Seller hired to market the home and represent the Seller. When market conditions are not so favorable to Sellers, it’s still common practice for Seller’s to offer Buyers and Buyer Agent Bonuses, in hopes of generating an offer. In today’s market, it’s quite common for Sellers to “buy down” the Buyer’s interest rate to help them qualify for the price on the Seller’s home. The point being, these offers of compensation were broadcast through the MLS systems and often revolved around Seller’s agreement to pay fees, even higher fees, if they can receive an acceptable offer. If Sellers historically offer incentives to Buyers, in hopes of generating an offer, is a Seller offering to pay a Buyer agent fee, any different from a Seller offering to pay other closing costs of the Buyer?

Buyer Agency came into existence in the 1990’s and Buyers were finally allowed to work with an agent vs. an attorney to actually represent their interests and offer them guidance and education about homes and the home buying process. I worked hard to bring Buyer Agency into the state as it made Buyer representation much more affordable than Buyer’s having to hire attorneys to draft and negotiate their offers. Attorneys didn’t want to be out showing buyers homes, matching up wants and needs; explaining the many variables of different homes, market conditions and offer/negotiation strategies. Attorney training is also always based on a win-lose framework—we win, the other side loses. However real estate doesn’t work well with this mentality. Successful negotiations usually require understanding of the other side’s perspective and needs, then finding common ground. That’s not typically an attorney’s forte’. Attorneys also charge for their time, regardless of the outcome, and this again is cost prohibitive for most buyers. Agents only get paid if and when a sale closes. Rule or no rule, most Sellers saw the wisdom in this offer of compensation. Some Buyers are now arguing they should negotiate directly with their agent and not have the Seller set this compensation rate. The theory being the Buyer wants to pay less and reduce their costs. This is possible and has been for many years in most states. I’d note many brokerages that tried to promote their lower fees have not been successful but it is a Buyer’s right.

Now let’s go back to the recent market times of the 20-Teens. Historically low inventory and high demand. Sellers are receiving multiple offers, often 10, 20, 40+% over the Seller’s asking price. I know, I wrote many in the 40+% over and still didn’t win the home. It’s been insane and anything but normal. So why would a Seller be required to pay a Buyer agent fee? Besides “the rules are the rules” comment, the next most common reason is because it benefited the Seller. To say the Buyer’s Agent “didn’t DO anything for me” is again between ignorant and disingenuous. The Buyer’s Agent brought you an offer to buy your home—just like you asked them to do by complying with the rule and listing contract they signed. Only one of those buyer’s agents got paid but you, the Seller, benefitted from all of their efforts—the competing offers you received. The buyer’s ability to qualify and possibly increase the “exuberance” of their offer terms was often predicated on the compensation you agreed to pay the Buyer’s agent. Buyers needed their funds to pay additional down payments, cover low appraisals, or pay other lender fees. Some Buyer’s Agents even agreed to reduce or eliminate this compensation to improve their Buyer’s offer by lowering the Seller’s costs. Many of these buyers would not have been able to perform if they had the added costs of paying the Buyer Agent fee. Fewer offers for Sellers likely meant lower overall offer prices, lower final sale prices and lower proceeds to the Sellers at closing. Still think you got no benefit from the Buyer’s Agent? We also saw Sellers updating and remodeling their homes during these crazy market conditions. Did they have to do this? Absolutely not, but they did. Wise Sellers knew that they’d get bigger returns on their home’s value by making these improvements and offering this compensation. Generating more offers, better offers and holding a stronger negotiation positions for the Home Seller was the intent and the result. 

These same home sellers, who likely sold in multiple offer situations, with over-asking price sales benefitted from the fees they agreed to pay to the Buyer’s agents. They signed a contract agreeing to pay these fees and benefitted from their actions. To now receive compensation from the Courts, claiming they were harmed or damaged by a rule or lack of understanding seems unlikely. Let’s also remember that most home sellers become home buyers, who again benefitted from the Seller-paid real estate fees on their purchases. The required rule of compensation has been out or going out of practice for years in many MLS systems. It seems the scope of the damages from these cases may well push us back to a market of less cooperation and information sharing. That isn’t a good practice either. Our current real estate practices may not be ideal, but they’re considered to be the best system in the world for equality of access and opportunity, for representation of separate parties interests and overall efficiency of process. Yes, our overall fees may be higher than other parts of the world but the services we provide are well above what other countries offer to Buyers or Sellers. In less favorable market conditions for home sellers, we are and will see Sellers wanting to offer bonuses to Agents and Buyers, but the Court’s rulings may prevent these options which won’t help Sellers or Buyers. It’s sad to see these cases arise and even more so to see the lack of understanding of how variations in market conditions create options that may benefit Buyers and Sellers. Strike a mandatory compensation requirement for Sellers? Sure; it’s done. Eliminating the ability to offer compensation to the Buyer or their Agent is a bridge too far. Reducing affordability or the sharing of available home information could also be a result and that benefits no one. Real estate is a unique and very difficult business to operate in, as evidenced by the huge influx and failure of businesses that Wall Street and Tech firms have been trying to disrupt our industry with for the past 20 years. It’s a People business and it requires options, not made up, after-the-fact, rules. This business evolves to the benefit of Sellers and Buyers and will continue to do so without the “benefits” of Court rulings to hamper our abilities to help our clients.

Photos by Tingey Injury Law Firm on Unsplash
Money Photo by Giorgio Trovato on Unsplash

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Every Which Way But Loose….?? https://www.paulisenburg.com/2023/06/29/every-which-way-but-loose https://www.paulisenburg.com/2023/06/29/every-which-way-but-loose#respond Thu, 29 Jun 2023 19:01:37 +0000 https://www.paulisenburg.com/?p=28345 We’ve been bombarded by divergent economic news events and statistics for the past few years. The forecasts seem just as divergent. There seems to be some consensus that a recession is coming but when? How severe? How long? What can we do about it? There’s no consensus on these answers. We, the general public, have […]

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We’ve been bombarded by divergent economic news events and statistics for the past few years. The forecasts seem just as divergent. There seems to be some consensus that a recession is coming but when? How severe? How long? What can we do about it? There’s no consensus on these answers. We, the general public, have done remarkably well at coping with this chaos and our ability and willingness to ignore this chaotic data only confounds the so-called experts and their forecasts. We were going into or in a recession in early 2022 but to most of us, it didn’t feel that way. The data said some things, life said others.

So how does this impact real estate? Interest rates doubled last year—bringing on more fears of an economic or at least real estate “CRASH”. This much of a rate hike would typically slow down buyers and we’d see the real estate market cooling off dramatically. That’s what the FED said they wanted—“to kill the real estate market”! However, the rise in interest rates created a shortage of homes for sale as some who were considering selling, stopped and sat still. They didn’t want to give up their low interest rate by selling their home, then turn around a buy a different home at likely a still higher price point and much higher interest rates. So what happened? The market didn’t crash. Prices did drop, in some of our area 25%, but in other areas only 10%. Then buyer demand kicked back in and sales came back with multiple offers and prices being bid back up 10-25%+! While these bids may not have reached our peak prices from the early spring of 2022, they still were and are going well above the valley of prices from November/December of 2022. Yes, overall sales volume, quantity of homes selling, is lower but the market is still quite active and the search for more homes to buy is still quite strong.

We’ve seen a pretty steady rise in median home prices in all of our region since the first of this year. Month over month in most areas and price ranges, we’ve seen a steady rise in home prices. But how with interest rates so high? Simply put—demand. We still have plenty of new household formations going on; people with new jobs in our area or in need of new houses and able to afford the homes they want at the interest rates of today. They’re all looking to and planning on refinancing their homes in 1-2 years, when we expect rates to be back into the 5% range, but for now they can and are affording to buy. It’s this willingness to spend, with confidence in their incomes, that is confusing the financial forecasters. Most forecasts expected the threat of higher interest rates would stop the market. Add in the threat of a recession and/or a job loss would surely stop people from spending but—the spending goes on. In housing, in travel, in automobiles, certainly in grocery spending. We’re all spending more and confounding “the experts”. Jerome Powel, FED Chairman, is still threatening to raise interest rates more to slow down the economy. We will see if these come to pass. New jobless claims are up, near peak levels for the past 4 years, but our confidence in the overall American economy, in our abilities to get that next job with a stable or better income is keeping the economy moving ahead.

There are certainly many economic indicators that are not encouraging but so far none of them are really dampening the housing market or the economy. There’s lots of talk about worrying but the overall sentiment appears to be more of an eye for opportunity and caution but a willingness to take on risk. We’re seeing some people diversify out of the stock market into real estate—fearing if there is a real economic collapse, real estate will perform better as we continue to have demand—in particular in our area of the country. People have to live someplace. Certainly the stock market’s rebound or strength is more concentrated in fewer stocks than most would like to see but it’s hard to say the market isn’t performing well. There’s lots of promise and optimism, despite constant watching for signs of trouble.

Fear is never a great motivator nor a good guide. Taking on risk is unique and subjective to each of us. I never recommend buying or selling a home without a broader discussion of your wants, needs and timelines. That said, we saw a huge run up in home values since 2019 and despite the drop in values last fall, it’s hard to say that real estate isn’t a wise decision—in our local region in particular. We have great diversity in economic engines in our region; wonderful natural resources to enjoy; pretty amazing weather—despite our reputation for rain and great services, culture and opportunities. Huge amounts of wealth and innovation are also in our region. These 2 factors alone, will continue to attract others to the Puget Sound area. Combine them  with our other attributes and we are a unique and desired location for many and this means strength in the housing market.

This isn’t a great real estate market for everyone, sadly not a great one for those trying to climb onto the economic ladder, but it seems likely we will continue to see stable to improving home values. Steady demand to buy into it will continue, especially when interest rates improve. We have some recession fears to watch, but the most likely scenario if these come to fruition are for  improved interest rates and improved demand for housing. Home prices usually improve or stay stable during times of recession. Waiting for the economy to crash and housing prices to drop isn’t likely a good strategy for those looking to get into the housing market. A better plan is to talk with advisors on how to save monies, pay off specific debts and find unique opportunities for you to get into the market. If you’d like advice or specific assistance with your needs, please reach out. I’m happy to help.

Photo by Jon Tyson on Unsplash

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Confusion Is The State of The Market https://www.paulisenburg.com/2023/01/19/confusion-is-the-state-of-the-market https://www.paulisenburg.com/2023/01/19/confusion-is-the-state-of-the-market#respond Thu, 19 Jan 2023 15:42:32 +0000 https://www.paulisenburg.com/?p=28309 We have data, headlines, whispers and fears running in all directions at this time. It is beyond me, and from what I’ve read, seen or heard, it seems beyond anyone to say they “know” what the market is or will do. Some of our region has prices still up from last year while other parts […]

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We have data, headlines, whispers and fears running in all directions at this time. It is beyond me, and from what I’ve read, seen or heard, it seems beyond anyone to say they “know” what the market is or will do. Some of our region has prices still up from last year while other parts of our market are off 3-6% from this time last year. But is comparing to last year really of value? We had peak pricing last April to May that was 15-30% over today’s prices, so does it sound genuine to say our prices are in line, slightly above or slightly below last year? Not likely for most home sellers and home buyers know these statistics aren’t reflecting the actual market conditions or temperament.

So, if not last year at this time, then when or what do we compare to? First, I think you have to recognize that 2021 and early 2022 were such abnormal times in our market that they don’t make a great basis for comparison to start with. When a market is accelerating at such a strong rate, any slow down is going to look extreme. When our weekly or monthly inventory levels were so low, comparing available homes to those times makes any “normal” inventory level look out of balance, especially if you use percentages for comparison. I think a better perspective is to look at the general market sense. We have seen price appreciation settle back down to a 4.5% range for annual appreciation over the past 2 years in Seattle and about 7% per year on the Eastside. By any historical standard, this is a very good rate for homeowners and provides sound reasons for home buyers to want to own their home.

We saw interest rates rise from 3% to 7% between March to September. This again was unprecedented. We’re now seeing rates moderate and drop to the 6.125% range, lower if you’re borrowing in the $1M+ range, closer to 5.5%. Rates are likely to see some bumps and gyrations this spring but the expected trend is for modest declines. There are also some reduced fees for some first time borrowers, to help ease the funds needed to secure a loan. The moderations in rates, even though still well above last winter’s rates, is good for home buyers and sellers. Payments and affordability are improving.

My perspective is this: there is always a market. People want to own their own home–it’s a wise investment and a great stabilizing force in controlling our lives. If you have fears of a recession, you have control over your housing costs, likely lower than rental rates. If you have fears of inflation, you again have control over your housing costs and an appreciating asset. If you have the desire to buy or change your home, the market is looking for good homes and there are solutions to help you afford your new home.

Home buyers are not overwhelmed with home choices in almost any area or price range. The headlines of a glut of inventory are nowhere near accurate. Yes, there’s some inventory, but most of us active in the market know we still have a scarcity of good homes to choose from. This is great news for home sellers. We currently have a stalemate in the thinking of some buyers and sellers in the market. The Sellers want last spring’s prices and the Buyers feel that if they hold out on making offers, home sellers will have to lower their prices. Both parties have too biased of perspectives.

Last spring, buyers were paying 20-40+% over asking prices. As I stated before, we’ve seen those sale prices decline by 15-30% depending on location and price range of the home. Today’s home sellers are generally accepting offers 2-3% under their asking prices. Buyers may be hoping to get 20-40% below asking prices but that’s not realistic and it won’t be going forward, either. Some home sellers still want last year’s values but that too isn’t going to happen. Instead, look at 5-7+% gains of the last few years and accept that’s very strong for annual real estate appreciation. Since most home sellers have owned their homes for 5+ years, your effective gain in value is still phenomenal. Recognize that buyers are still paying a higher price, in terms of monthly payments, than they were last year, so accept your good fortune for the value of your home and sell it, if that is your need, desire or intention.

Many people are fearing a recession this year and we’re now hearing more local employers will be laying off employees versus the hiring freezes we saw last year. Some may feel like they shouldn’t be risking a home purchase during these uncertain times. That’s a very wise consideration. It is never wise to buy a home if you think you will need to sell it in less than 3-5 years. Patience, not fear, can be your friend. I would still offer some perspective to also consider. We’re at near record low unemployment levels. If you were to lose your current job, how likely is it you would find another one, locally, in the near future? For most of our local employees, the answer is usually very good odds for finding a comparably paying job in a fairly short time frame. Still, no one wants to lose their job, without their control. The  solution may well be to sit still and ride out the first half of this year and see how your job and company are performing. Interest rates are expected to soften going into the second half of the year and inventory will likely  increase to offer you more good choices. Late summer and fall often present better market conditions for home buyers.

While we’re talking about inventory increases, let’s address another unrealistic hope or fear. Home inventories will continue to balloon, foreclosures will rise, home prices will drop substantially and you’ll be able to get that 20% low offer accepted by any or every home seller. Do you recall me talking about the above normal appreciation our local homeowners have been experiencing? This now equates to the average local homeowner having 40+% equity in their home. If they were in real need of their home’s equity, they would sell it, even at today’s prices or lower—if we follow the pessimist’s logic, but certainly not lose it to foreclosure. Additionally, we had 70+% of homeowners, with a mortgage, refinance their home between 2020 and the early spring of 2022. These folks aren’t likely planning to sell their home any time soon. They have as low of a house payment as they can get–lower in most cases than they could rent any type of home for–so they won’t be selling now or in the near future. This will keep overall inventory levels in check. The rationale that panicked home sellers will be flooding the market with inventory isn’t a reality; certainly not in our local market. Pessimistic buyers in this market are looking for “a deal” more than a home. If that’s your perspective, you likely won’t find the deal you want and you’ll miss good opportunities to own a home and asset that will perform very well for you. But they, hopefully not you, were only looking for a deal.

The reality is simple and usually constant for real estate. There is always a market. If you have a need or desire to buy or sell, opportunities are and will be available in this market. We have a more balanced market–supply of homes matching demand by buyers–than we’ve had in the past 4-5 years. We have an overall strong local economy with good, stable employment–even with the headline fears–and we have improving interest rates. We still have increasing household formations as our millennial population grows and a pretty steady supply of the baby boomer population retiring and likely ready to capture their equity and change their housing situation. It’s not frenetic, like the last 2 years, but it’s a market that works for buyers and sellers, if you’re realistic and want to be in the market.

Give me a call to discuss your interests, needs and concerns. We can create a strategy to help you win in these confusing times. I’m happy to talk when you are. Thank you for your time.

 

Post Photos by Uday Mittal on Unsplash and Brett Jordan on Unsplash

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Redfin Bows Out of i-Buying https://www.paulisenburg.com/2022/11/10/redfin-bows-out-of-i-buying https://www.paulisenburg.com/2022/11/10/redfin-bows-out-of-i-buying#respond Thu, 10 Nov 2022 00:33:06 +0000 https://www.paulisenburg.com/?p=28285 As our real estate market calms down, another big i-Buyer has closed down it’s program of buying homes directly from home sellers, so called iBuying, for instant and usually internet based home buying. Almost one year ago at this time, Zillow announced they would stop buying homes directly from home sellers as their losses from […]

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As our real estate market calms down, another big i-Buyer has closed down it’s program of buying homes directly from home sellers, so called iBuying, for instant and usually internet based home buying. Almost one year ago at this time, Zillow announced they would stop buying homes directly from home sellers as their losses from inaccurate pricing nearly put them out of business. Last week Open Door, the largest i-Buyer company, announced almost a $1 Billion, yes Billion, dollar loss in the 3rd quarter of this year. While they are still in business, it isn’t likely they’ll be buying any more homes in the near future as they work to clear their current inventory and get their final losses under control.

Today Glenn Kelman, CEO of Redfin, announced they will stop their direct buying of homes and they will also be laying off 862 more employees as the market correction continues. They’d been curtailing their purchases but now have ceased the program completely. A few weeks back the CEO commented on the market activity and said they were pricing the homes they’d purchased 5% below any comparable property and if the home didn’t sell in the first few days time on the market, they’d start lowering the price until it sold. Not surprising, this strategy gets costly in a hurry.

It’s interesting to me that these Outsider, FinTech companies, looked at Real Estate as a much simpler business and financial “game” to get into while the market was on the upswing. Pointing at veteran agents and brokerages as out of touch with modern times and technology, they would step in and show us “how to do it” in a modern world. Yet only a few months into a market correction they have almost bankrupted themselves and closed down their programs. Redfin is also having to lay off their salaried agents as they aren’t getting the buyer/seller traffic nor customer loyalty that traditional agents and brokerages strive to build their brands and business on. I’m not picking on Redfin, only pointing out that they’ve continually underestimated the complexities of this business and the effort it takes to survive and thrive in good and challenging market conditions. They aren’t alone; many others made these same mistakes and under-estimations.

Those of us in the trenches, especially with longevity in the business, know this is a people business, a customer-centric business where patience, communication, caring and knowledge are required–in good cycles and in downturns. While we have seen market prices dip 20-25% off their peaks of this spring, no one should have expected that pace or pricing to continue. To stabilize would have been a good hope but with such dramatic rises in price points and sale activity we all should have recognized that some reversion was due. We are back to last year’s price points, a time when most of us were pinching ourselves in disbelief; those were record high levels as well, so this isn’t such horrible news. We likely have a bit more downturn to endure as interest rates continue to be at near 20 year highs, but it’s not likely we see pricing get much below early 2021 levels.

The FinTecch companies came in, along with other Wall Street outsiders, and drove up pricing with their i-Buying programs and are now accelerating the decline as they attempt to dump their inventory, take their losses and get out of this “simple game”. This isn’t a game. It’s our homes, our security, futures, our retirement planning. Yes, we’re facing some challenges but we are still in a quite active market where reasonable returns on your investment can be expected and future plans can be built upon. Let me know if you need some experienced guidance and calm perspective on how to maneuver in our current conditions. I’d be happy to help you.

 

Photo by Isaac Smith on Unsplash

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Crazy Market Whiplash https://www.paulisenburg.com/2022/10/24/crazy-market-whiplash https://www.paulisenburg.com/2022/10/24/crazy-market-whiplash#respond Mon, 24 Oct 2022 20:52:15 +0000 https://www.paulisenburg.com/?p=28269 We’ve come out of a market with historic price appreciation, 70-80+% of offers at/above asking price and a record sales pace to now a market with sales  slumping by 20% and sale prices 20-25% off our peak prices of April and May of this spring. Hold on to your head and your hat! We’ve seen […]

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We’ve come out of a market with historic price appreciation, 70-80+% of offers at/above asking price and a record sales pace to now a market with sales  slumping by 20% and sale prices 20-25% off our peak prices of April and May of this spring. Hold on to your head and your hat!

We’ve seen interest rates climb from roughly 3% this spring to basically 7% right now. Yikes! Year over year prices are still up, but minimally now, over last year’s prices. Prices likely fall below last year’s prices in most of our area as we head further into the fall and winter market times.

Where will the whiplash go next? Affordability is declining with interest rate increases. Sales pace will likely  continue to decline as rates rise. So will prices continue to drop as well? How much further and when will rates begin to improve? Lots of really big questions are on our minds right now. The answers aren’t simple.

First some perspective.
We really don’t want to compare our present market to the most unusual market activity in real estate history. This means we can’t really compare today’s or tomorrow’s market to 2021 or the first half of 2022. These were anomaly markets in price appreciation, pace and frenzy that were not and never should be considered normal. They weren’t. So you have to go back to 2018 or 2019 to gain some sense of perspective on inventory levels, sales paces and in most cases prices. Since 2020 had Covid interruptions, again, an anomaly year for most any comparisons.

Our inventory levels in King County are 500-1500 fewer homes today than 2019 and 2018 levels while our pending sales are 700 and 400 below 2019 and 2018 levels. So, yes, our sales are off; again mostly a factor of affordability. Our median price is $200K above those years; no small detail to overlook, and we’re $120K over 2020’s prices and $50K above 2021’s median price. We’ve had prolonged low interest rates—manipulated by government intervention, since those years, and our wage growth, population, household formations and job growth have increased demand and home prices. Today the government’s interference has the opposite intent. The Fed has been outspoken that they want to shut down or crush the housing market as they attempt to bring inflation under control. Every real estate sale has a profound positive impact on other industries, so to slow the entire economy, you target the biggest impacts first. Real Estate is that biggest target.

So what lies ahead?

I sure wish I knew the full answer but here’s a few points to keep in mind. We have a lot of tech employment in our area—right? Yes. Stock values on most of our large local employers are down about 31% in the past year; Apple only 21% but others more. That said, while hiring has slowed, layoffs aren’t slated to be large as these employers know the struggles to find new talent to help them grow or maintain prosperity in challenging financial times. It’s cheaper to keep the talent, regardless of cost, than to find and recruit replacements. That’s very stabilizing for our region.

We also know that household formations are continuing to grow (appx 1.7M in 2022) as millennials age up  and get better jobs—see comment above on need to find replacement employees. Small studio and 1 bdrm apartments are out there but larger apartments and rental houses are harder to find and prices for those are rising; in much of our area by 20+% in the last year. So, if rents are rising, inflation is rising and you need a place to live, do you buy and get some stability to your cost of living or continue to rent and wait for prices and interest rates to drop? It’s not likely prices and interest rates will be dropping at the same time. Any relief in interest rates or home prices likely increases demand.

Lots of conversations and fear about recession.

Are we in one, is it coming, when, for how long, how severe?
We’ve already changed the definition of a recession—2 consecutive quarters of declining GDP. It’s hard to say we’re in a recession when unemployment is so low, spending is still strong and inflation is still so high. The new perspective is we’ve dropped off the skyrocketing inflation pace but not really hit a recession yet. The sad point is, there’s no new agreed upon data to say what is a recession. So again, some perspective is needed.

With the overall low unemployment levels and the strong wage levels presently in place, most forecasts I’m seeing say these factors will moderate the depth and likely duration of any economic downturn. While the Fed said they’d like to see unemployment rise by another 1.5-2%, so something into the 5%+ range, employers are resistant to cut staff, again as it’s been very hard to staff up since the Covid outbreak. Employers think they can maintain profitability, even with higher labor costs. This is good news for business but gives the Fed more reason to keep interest rates high to help fight inflation. So who wins this struggle? The Fed has indicated it will be making another .75-1.25% rise in their rates by the end of this year. That won’t translate completely to mortgage rates but it’s not good news for housing. There is some indication the Fed may actually stop at the .75% increase level and then sit still to see how the economy reacts and performs for a few months, before taking any further action.

What does all of this mean for house prices and affordability?

I mentioned at the outset, there isn’t a short answer or clear path. As long as this article is, that point hasn’t changed, yet. Good jobs are always good for the housing market. Household formations are good for housing. High interest rates are not. We’re starting to see more effective Adjustable Rate Mortgages come back into the market. Agents and Sellers are also recognizing the value of interest rate buy downs, to buy down the interest rate on your new home to a 5% or so range is more helpful to buyers than a $40-80K price reduction. The hope being, if we can make monthly payments more affordable by ARMs or buy downs, more people can afford to buy that next home while prices are having a near term decline. That said, while inventory levels are at similar levels to our peak markets and below our pre-2019 levels, we are still short on inventory. We need more homes to sell. That’s good and bad for the housing market. Low inventory means stable or upward pressure on home prices but that leads to higher prices and less affordability.

Let’s talk a bit more about inventory:

Builders have never gotten back up to their normal building levels seen prior to the 2008 Recession. They’ve been well off the pace of building for 15+ years now. That means we’re not going to be building our way out of an inventory shortage. We also had record high refinance levels from 2020 until early this year. Homeowners locked in mortgage rates from 2.75-3.5% levels for 15-30 year terms. Many of them won’t be selling soon in the face of 7% interest rates today. So, if you’re thinking inventory levels will continue to climb, you may need to reconsider that scenario. With strong employment levels and near record high equity levels most homeowners have in their homes, desperate sellers won’t be that common. If we do see any sense of an economic downturn, and I expect we will, it should help reduce interest rates but likely only to the 6% range. This still improves payments and affordability by 10%. That’s a good thing for housing but likely puts more demand on inventory.

So who would buy or sell a home now?

Great question. Real estate is based on change and change is a constant in all of our lives. It operates at different points, levels and speeds but it’s always happening. When do you change your home? For most, only when there is a real need or desire. Given our current market mentality, it may take a bigger change to have you move. The expectations are that the stock market levels will get back to their recent top levels by 2024-2025. Housing may be in that same timeframe as well. So, if you’re going through change and you would live in your new home for the next 5-7 years (the new norm is now 10-11 years of time for staying in our homes) and you can find and afford that home you want now, why wouldn’t you make that change now. It’s likely you’ll be able to lower your future payments soon, by refinancing, and you can secure that home now, at a lower price than earlier this year, with much less likelihood of bidding wars. This may not be the bottom on home prices but you’ll be in this new home plenty long enough to see the price rising, likely above this years’ peak, as our region’s economy rebounds because of our strong economic resources.

Why would you sell now? Again, change. It’s likely interest rates do rise over the next few months and affordability declines. Where are you going? When would you like to be there? Today’s market likely offers you a great return on your investment and provides the funds and freedom you need to go where you’d like to be. The bridge between where you are and where you want to be may be closer now than recent times. Will the Spring market be better? This is a matter of analyzing specific circumstances about your home, your hyper-local market conditions and your situational needs. The overall reality is, if you have the need, the market is still quite strong and selling your home at a very good value is still a reality we can achieve. It may not be our peak but it’s almost certainly higher than most any time in our region.

One last point on who should buy a home now.

Remember when I mentioned Builders are building way fewer homes since 2007? The most troubling part of th0se statistics are the vast majority of recent permits have been for multi-family homes—often apartments, most commonly 1-bedroom apartments—some for condominiums and townhouses and fewer for detached single family homes. While these alternative home choices help with affordability, what they are also doing is dwindling our single-family home supply. This shrinking supply or addition to inventory is driving up prices and taking away the opportunity for the number one wealth generating asset in our country—owning your own home. The data shows homeowners have 400% greater net worth than non-homeowners. Our homes are often our number one asset as it’s harder to save money in the face of rising rents. Locking in our cost of housing, even at higher interest rates, helps promote your long-term net worth. From this perspective we should all be buying a home or investment property to help improve our future net worth. This is becoming harder to do with shrinking inventories, while also more essential.

Our present economic conditions are unique. The “right” answer on what you should do is also unique. My goal has always been to offer you a place of calm, of perspective and of information so you can make a more informed decision. One thing I know is certain, our region will remain strong, housing demand will continue and in the not-too-distant future, we’ll see home values rising and interest rates declining. Where these conditions overlap with your needs is something I’m happy to discuss and offer you guidance on. Let me know when you need my assistance. I’m happy to help.

Thank you for your time.

 

Top photo courtesy of Hans-peter-gauster/Unsplash

Chaos photo courtesy of Brett Jordan/Unsplash

 

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Working in Crazy Times https://www.paulisenburg.com/2022/03/02/working-in-crazy-times https://www.paulisenburg.com/2022/03/02/working-in-crazy-times#respond Wed, 02 Mar 2022 00:30:02 +0000 https://www.paulisenburg.com/?p=28253 To say these are crazy times is certainly an understatement. Many of us have wondered how crazy things could get since Covid arrived. So many directions to go on this but we’ll stick with the real estate world. Certainly declining inventory of homes for sale has occurred. Buyer demand hitting near all time highs has […]

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To say these are crazy times is certainly an understatement. Many of us have wondered how crazy things could get since Covid arrived. So many directions to go on this but we’ll stick with the real estate world. Certainly declining inventory of homes for sale has occurred. Buyer demand hitting near all time highs has too. Job growth–for many; wage growth–also for many; government handouts of money–again for many; combined with a desire or need for a different home has just added crazy amounts of fuel to the fire of the already on-fire marketplace. We now add in fears of war, inflation, of stock market corrections–already happening, pushing many investors and people looking for new homes to jump after many or any opportunities in the local marketplace. Our February statistics will be out soon but they will likely show 70+% of home sales being at or above their asking price and I’d bet the median over asking price for most homes will be above20% for much of our region.

Juxtapose those statements with what may be a temporary or not so temporary breath in the market in the last 10 days and it’s very difficult to advise Buyers or Sellers on what is going on in the market. You make an offer 30% over asking price with no contingencies in one week and lose. The next week you win with a full price offer and little to no competition in the same area and price range. Change your location or price range and the sands are still shifting and conditions are completely different. WOW. It is exhausting and infuriating for home buyers, sellers and agents alike. There is no one winning strategy and certainly no logic to what it takes to win in these crazy times.

Here’s what we know. Several layers of uncertainty are impacting the market in different directions at the same time. War in Ukraine obviously has us all worried and wondering where this path goes and how quickly can this turn our world upside down. Stock market worries have some investors jumping back to buy real estate–especially in strong job and job-growth markets, like the greater Seattle area. Inflation has spooked the Fed and their raising of rates is now the expected for the balance of the year. But…other investors are looking for security and US Mortgage Backed Securities are seen as a very safe investment and we’re now seeing drops in interest rates as more investors look toward these for security. It is not abnormal to see interest rates drop when the Fed is raising interest rates at the same time. It might seem counter intuitive but again, not abnormal and these are crazy times.

Local businesses are staring to announce and ask their employees to start coming back to the office and there are millions of square feet of new office building being built in our region, set to open in the next 2-3 years and beyond. This will mean more job growth, new inward migration, more demand and….yes, most likely continued price hikes on home values. I have no expectation of prices spiking like we saw in 2021 for the region as a whole, but Seattle, as an example, has only had a 10% price growth  over the last 3 years while the Eastside has had 66.5% growth  in that same time frame; Snohomish County is up 57%. Seattle is making up for some of that so far this year, prices likely up 20% so far this year. It’s likely this will moderate through the year for Seattle and the rest of the region, but upward pressure will remain; even in the face of so much uncertainty.

Many ask, are we crazy to be bidding up so high on so many houses? This can’t continue, it has to crash and then what? I answer, these are great questions and reasonable sentiments to hold, however the bigger pictures still show expected price growth of close to 10% for this year and likely moderating closer to a long-term norm of 6%/year growth thereafter. So, if you really want or need to buy a home and you expect you’ll stay in that home for 3-5 to 7+ years, much shorter than the norms these days, then you’ll be missing out on great appreciation on your home if you aren’t in the market now. I think most agents are somewhat hoping for some breath moments in the market, like we’re seeing in the last 10 or so days. We are continuing to see increasing new on market listings, so our reservoir of homes to sell may finally start to raise. Don’t get too optimistic on this raise though. We had near record levels of new on market listings last year–it’s the only way we could have had near record levels of sales, but our reservoir only depleted. There’s optimism for some filling of this reservoir in 2022.

Buyers, take heed. The market conditions are improving with choices but our reservoir is still so low that when the right home choice(s) show up for you, you do have to be ready to act and still be bold with your offer. We are by no means entering market conditions that will have sellers making any significant concessions. Getting the home you want, in the location you want, at a price you can afford–that is a win and I don’t see that definition changing in any dramatic sense for the balance of this year. So, as crazy as things are, it seems they’re pretty well the same and norm of the last few years. Let’s hope the war in Ukraine can be resolved soon, so we can all breath a little easier and that layer of uncertainty can dissipate.

Buyers and Sellers, please recognize that you really do need an experienced agent to help you determine what the best potential strategies are and help present you, your home or your offer to the market. There are too many variables for those outside the market to understand. Seek advice and guidance on how to define and find your win in these crazy times.

Photo by Nick Fewings on Unsplash

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Zillow Bows Out of i-Buying Homes https://www.paulisenburg.com/2021/11/05/zillow-bows-out-of-i-buying-homes https://www.paulisenburg.com/2021/11/05/zillow-bows-out-of-i-buying-homes#respond Fri, 05 Nov 2021 23:17:09 +0000 https://www.paulisenburg.com/?p=28233 Big news was announced this week when Zillow stated they will no longer be buying or making Instant Offers to buy homes across the country. In early October they announced they were putting the program on hold due to backlogs of homes, labor and material shortages. They had too much inventory on their books. It […]

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Big news was announced this week when Zillow stated they will no longer be buying or making Instant Offers to buy homes across the country. In early October they announced they were putting the program on hold due to backlogs of homes, labor and material shortages. They had too much inventory on their books. It now seems that these issues, along with improper valuations, have taken a larger toll on the company and turned the profits and business model upside down. Zillow had a huge run up in buying of homes across the country after hitting pause during much of 2020 and the Covid crisis. Now, they’ve come to find out that buying and selling homes is more complicated than they thought. Something they recognized 15+ years ago but decided to ignore when Wall Street and large financial companies were plowing money into their company.

While Zillow is not alone in the Instant Offer, iBuying, model, they were a dominant player in the small share of iBuying in our area and around the country. Most iBuying programs don’t operate in Washington for a number of reasons. First and foremost, our home prices are high, relative to many other regions in the country. Second, many of our homes and neighborhoods are not formulaic in pricing. Each neighborhood has unique characteristics and those affect home values. The variation in our home’s sizes, features, character and styles also affect values and market appeal. Many iBuying programs are offered only on more specific home sizes, locations, age and styles. If there are 200, similarly sized, 2-story homes built by the same builder in fairly similar communities, it’s much easier to evaluate and predict present and future values for a home. But formulas don’t work in our areas and many others. You need hands on experience for proper valuations. These errant valuations have been good for those homeowners who were able to sell their homes to Zillow, but it shows that assessing a home’s value is part science and part art. The art takes people and time to master.

Zillow has been improving their valuation models over the past several years. By their own admissions in the beginning, their Zestimates were off by 20%, + or -, almost 50% of the time. In the last 5-7 years their valuations were more like 5-7% variable, high or low. Yet even with 5-20% annual appreciation across the country, their valuations still weren’t close enough to stem their losses. The latest estimates show they were losing 6% per home bought. For a while, they accepted and attributed the losses to marketing–we’re capturing more eyeballs, we’re connecting sellers with agents who are paying us $5,000-$25,000/month for seller leads, so we’ll make up the losses on those lead revenues or future market share. Sadly, like all businesses must learn, you can’t lose money on most of your sales and make it up in volume. At some point the zeal of Wall Street’s money slows and a return on investment is demanded.

I don’t consider this a uniquely Zillow issue. Having been in this business for 34 years, I’ve seen many cycles and also understand the many nuances to this business. It is much harder to be in this business, running a business, than it looks like from the outside. Lots of Wall Street Fin-Tech companies want to get into the Real Estate market and continue to try and disrupt the industry. Like all businesses, technology and change are inevitably changing the process but for all the monies spent, it still turns out that most home buyers and sellers look for a referral of a trusted advisor or go back to a trusted advisor to buy or sell a home. Most Buyers who don’t have their own agent/advisor either bought a new construction home, without an agent to represent them, or regretted not having someone to help them navigate, understand and capitalize on the market when they bought or sold. This is not a swipe left, swipe right process and those who seek to promote it as such only show their lack of true knowledge of what you need to know and how the real estate industry operates.

This is and will continue to be a people business. Our homes, our security, our identities are wrapped up in many to most real estate sales and thinking an automated chat bot or algorithm can handle the variables and nuances is naive to ignorant. Yes, technology does make it simpler, smoother and easier to conduct. It doesn’t replace the need for a trusted advisor and guide to help you through the innumerable steps and potential pitfalls of “figuring it out” or trusting a bot or algorithm to complete this with you.

Zillow isn’t going away; they’ll continue to work to capture eyeballs and pair the “what’s my home worth” homeowner to an agent willing to pay them $1,000’s a month or now, a per sale percentage even higher than before. Their hope is still to draw homeowners into their system to help them get a new mortgage for their new home or do the title and escrow work for the sale of the home you’re seeking a value for. They just won’t be buying your home in the near future. I have no doubt they will resurrect that step in a few more years. My concern is that Zillow, and all other Fin-Tech companies, don’t really want to help you. They only want to steer you to people who are paying them for your name and an introduction. Your satisfaction isn’t their goal. Capturing your information so it can be sold to someone else, so they make money on you, regardless of what next steps you actually take is their goal. I don’t think that’s what most home buyers or sellers are looking for–to be digitized data, sold to the highest bidder without regard for your actual needs or goals. If that’s progress and the main goal of the disruptors, which it seems it is, then I hope you’ll join me in seeking a better way, a personal and personable way. Seeking to understand your needs, goals and fears and walking the path to success beside, in front and behind you, to the end. Technology helps us, but people helping people is what this business is truly about.

 

Photo by Annie Spratt on Unsplash

 

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Why a Housing Bubble Isn’t Our Problem https://www.paulisenburg.com/2021/06/22/why-a-housing-bubble-isnt-our-problem https://www.paulisenburg.com/2021/06/22/why-a-housing-bubble-isnt-our-problem#respond Tue, 22 Jun 2021 23:21:26 +0000 https://www.paulisenburg.com/?p=28207 I’ve mentioned in earlier posts that I think the fears of a housing bubble are misguided or more accurately not well founded. The number of people owning their homes outright, no mortgage debt at all, is still quite high, in the 25-30% range. The number of people with 50+% equity in their homes is also […]

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I’ve mentioned in earlier posts that I think the fears of a housing bubble are misguided or more accurately not well founded. The number of people owning their homes outright, no mortgage debt at all, is still quite high, in the 25-30% range. The number of people with 50+% equity in their homes is also in this same nearly 30% range. The underwriting standards for loans today is much more strict than back before the Great Recession, so borrowers, as any recent home buyer knows, must supply a significant amount of documentation to get their loans approved. This offers confidence to the lenders and stability to our housing markets. Short of a catastrophic national or global event—Covid wasn’t enough, as we have all seen, –it’s very unlikely we have a housing bubble issue.

That said we have other housing issues that are deserve attention. Namely supply and affordability. Supply shortages are well known and the horror stories myself, my clients and other agents and buyers are seeing are quite frustrating. We bare our souls, our dignity and empty our bank accounts and oops, sorry not quite enough to win against some other home buyer. Who are these home buyers?

It’s true we do have more outside investors jumping back into our marketplace but the reality is most of these other buyers were already here or have come here for a new job. Yes, the region as a whole has seen an increase in people leaving the Puget Sound area and the state, but the reality is we have many new people coming in. We also have a huge population of Millennials living here, looking for their first or move up home. Millennials are a larger segment of our population than Baby Boomers and they are all looking to get out of apartments and small condominiums and into traditional homes. The Gen Z population, about the size of Baby Boomers, are also breaking into the marketplace and this will continue to put pressure on our supply side.

Combining this continued pressure from existing residents in our area with the ability to work from home, part or full time, is also helping spread this demand around the Sound. That too may not be going away in any near-term scenario. Now add what is expected to be another 50-60K new employees to the region in the next 2-4 years and you can see why I don’t see any way for us to be facing a housing bubble. A lot of apartments are being built in anticipation of this new surge but they’ll be homebuyers very soon as well.

While we’re on the topic of misplaced or unfounded real estate rumors, here’s another big misconception. That there are no houses for sale. Yes, most of the region is at .4 or less month’s supply of homes but the other reality is that our new listings taken–homes coming on the market every day, week and month are also near record levels. The Eastside’s new listings so far this year are only up 3.8% compared to 2019 levels which were very similar to 2018 levels. Seattle, however, is up 46% over 2019 levels which were slightly higher than 2018 levels. King County’s new listings were up 89% over 2019 levels, again 2018 about 4% lower than 2019’s new listings and Snohomish County has 81% more inventory this year than 2019 which was slightly lower than 2018’s inventory levels.

What you see when you look at the bigger picture and more data is we actually have had an extremely full inventory so far this year. I didn’t compare to 2020 as the Covid interruption skews the data to even greater disparities. Seeing this new level of inventory gives you a better sense of the true demand for housing in our area. So while the overall inventory levels are down, they are down mostly due to demand vs. supply. Let’s look at one other data point for maybe a deeper understanding of the market conditions.

Homes priced from $1M-$2.5M show the second issue for our area–affordability. I know I’ve cautioned you in the past, don’t just look at the home price–look at the monthly payment. Low interest rates and your current home’s equity combined make what seems like unaffordable home prices be within the reach of many in our region. That said, it’s still beyond the reach for many. On the Eastside the number of closed sales so far this year in this $1M-2.5M range is up 55% from 2019. Seattle is up 100%; King County up 89% and Snohomish County is up 60%.

So, when we look at this new data point we see that yes, overall inventory is up but in most areas the real inventory is in the $1M-2.5M range. The homes under $1M are still coming on but a healthy percentage of the inventory increase is in these upper price ranges of homes. Many like to say this isn’t fair; that housing should be a right; that prices should be controlled or regulated but there are no examples of any housing market interference or price controls that have shown to work in any market. Not in rent and certainly not in ownership. As you see in any world class city, our region has now evolved to that level, there are areas that many people can not afford to live. It’s simply a reality to accept not fight. I’d love to live on the beaches of Carmel or Monterey but it’s not going to happen. I can ask and demand my fair share and equity of access but it still won’t happen.

Our region went on a crash diet of no or almost no new construction being built for 7+ years. New regulations for new construction now add almost 25% to a new home’s costs. The time to develop land to build can be 4+ years, so we are behind the curve on getting new homes built to increase our supply and undoubtedly these new homes will not fit in the current day’s “affordable” price range for homes. Builders are paying 2018-2019 home prices to buy a home and tear it down to build new homes. These certainly can’t be in the affordable price range. The reality is much of our area won’t be affordable for some.

Prices can’t continue to escalate–that’s also a reality. Rise, indeed, but at today’s pace, no; we can’t maintain this amount of price escalation. Wages will tap out the price range but that is still likely above our current price points. Does that mean a bubble is coming? No. Only that there is and will be a ceiling coming. We still have a tremendous wealth transfer approaching as well. Baby Boomers can’t live forever and we will be selling our homes, or our estates will, in the next 8-10 years and for the decade thereafter. This creates homes to sell while also not creating a buyer for a new home. It also will mean the passing of wealth to younger family members. This increase of sellers who also won’t be buying a home will help bring some balance to our market and won’t come by regulation or outside interference. We’re in a cyclical market and currently that is all going up. I don’t see the downside being steep or significant; just coming our way but quite a few years out from now. In the meantime, ask for guidance from an active agent who can help you find the right opportunities for your needs. Don’t fear a bubble, a  collapse or a home’s sale price. Take advantage of the very low interest rates to find a home you can enjoy and afford for the next 5-7+ years. The numbers show the homes are out there. They may sell in a week but they are coming up and on the market for you to capture. Be patient. Summer can be a very good time to be a buyer in our region. With post-Covid vacation plans in place, some buyers will be taking themselves off the market for some of our summer time.

 

Photo by Armand Khoury on Unsplash

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About That Inventory Shortage…. https://www.paulisenburg.com/2021/04/20/about-that-inventory-shortage https://www.paulisenburg.com/2021/04/20/about-that-inventory-shortage#respond Tue, 20 Apr 2021 22:07:38 +0000 https://www.paulisenburg.com/?p=28199 A quick video to discuss the actual state of new-on-market listing levels. While it’s true our “end of the month,” snapshot-in-time, numbers for available homes for sale are at record lows, in the 25-33% range of our historical homes-for-sale levels, it’s also true that our new listings taken each week and month are at or […]

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A quick video to discuss the actual state of new-on-market listing levels. While it’s true our “end of the month,” snapshot-in-time, numbers for available homes for sale are at record lows, in the 25-33% range of our historical homes-for-sale levels, it’s also true that our new listings taken each week and month are at or near record high levels. So the reality is we do have normal to high inventory and we also have record high demand. This allows the fly-over headlines to report there are no homes for sale. I’ll be breaking down some of the various aspects of these seemingly contradictory statistics in the coming days but wanted to send out this message and video in the meantime. Stay tuned for more details.

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Smile, Hope Springs Eternal https://www.paulisenburg.com/2021/04/06/smile-hope-springs-eternal https://www.paulisenburg.com/2021/04/06/smile-hope-springs-eternal#respond Tue, 06 Apr 2021 22:52:33 +0000 https://www.paulisenburg.com/?p=951 For most of us, this past week or so of sunshine has brightened our outlooks dramatically. Yes, it’s just the weather but after 2020 and a rocky winter, it seems we’re all reaching for and clinging to these bright moments of joy. If we can string enough of them together, we can modify our perspectives and […]

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For most of us, this past week or so of sunshine has brightened our outlooks dramatically. Yes, it’s just the weather but after 2020 and a rocky winter, it seems we’re all reaching for and clinging to these bright moments of joy. If we can string enough of them together, we can modify our perspectives and focus to see more positive features in our worlds. Yes, we’re likely still wearing masks and we can’t do everything we were doing before Covid, but again, it’s a matter of focus and perspective and it’s energizing.

The media, the headlines, the mean tweets and the struggles are still with us but our optimism is back. Life won’t go back to our memorialized past; life doesn’t work that way. But it moves ahead; evolved and enlightened. Our mission and goal should be to focus our energies and actions on what we want to be, do or have; where we want to go and who we want to be with us on our new journeys. So, enjoy this energy and focus on finding your passions.

So what the heck does any of this have to do with real estate or our relationships together. First, I hope we are and have more than a buyer, seller, Realtor relationship; for most of us I know we do. So, if your plans and energy steer you towards adventures I can help with, certainly let me know. If it’s a new or renewed adventure you’re enjoying, I hope you’ll take a moment to share that enthusiasm with me. We all are looking for positive support and I’m here to help and share in your new energies or struggles to find your energized path. Let me know how you’re doing. I’m always glad to hear from you and talk with you about your new adventures or challenges.

The real estate market definitely has its struggles and keeping a positive focus is a challenge. Helping people understand the nuances, complexities and opportunities in the market is my job and passion; but it can still be challenging. Since real estate is driven by change, helping you keep your energy and focused path moving forward is also part of what I do. Not to have you buy or sell a property; but helping  you keep energized on your path, where ever it leads you or helping you find a path that will energize you.

Our rainy weather will be returning; that is a certainty, but we can look past some rain knowing more sunshine, energy and opportunities are coming our way. I hope you’ll accept this small challenge to stop yourself from focusing on any rainy days you don’t want to enjoy and instead make plans for your sunny days ahead. Create space and time for these new adventures and they will come. If any of them happen to involve you needing real estate services, well, we can talk about that too but I hope to hear from you  and talk about your new adventures, joys and plans.

Happy Spring and we’ll talk soon.

 

Photo courtesy of John Mark Smith Unsplash

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