The Latest on Lending

Time to bring in an expert... Matt Culp, Broker/Owner of Bainbridge Lendging Group, agreed to provide a lendign update for me to post today. If you have any questions or comments, feel free to post them and I can ask Matt to field them. Here is Matt's post:

"The Fed cut their rate again today by .5%. This puts the Fed Funds Rate at 1.0%, the lowest we have seen since the June 2003-June 2004 period. This cut follows the .5% cut made by the Fed on October 2nd. So, if you have a line of credit tied to Prime, that rate likely just dropped by .5%. Prime will now be at 4.0%. Do check your LOC paperwork to determine if the loan has a floor rate.

Mortgage Rates and the Bond market are basically flat today in response as the cut made today was pretty much baked in already. No big suprises in the Fed comments after the cut. However, they did not mention anything about inflation risks or pressures. This is good as often the absence of comments means something. This means rates can and perhaps should stay low for the foreseeable future in order to help the struggling economy and that the inflation pressure created by such low Fed rates will be minimal or non-existent. The Bond market and 10 year yield are good barometers of the future inflation risk. The yield today is hovering right around 3.80%. This is down slightly from yesterday but it had been down as low as 3.50% the day before the last Fed cut earlier this month. So mortgage and Bond rates are up a bit over the last few weeks as I have pointed out in prior emails. We are at 6.25% at 1 point on the 30 year fixed. That is about .375% higher than earlier in the month.

So, rates are still good, just in the upper region of the range we have been in the last 3 years or so. And lenders are still lending! By the way, the Stimulus Act Jumbo loan ($475k in Kitsap) is slated to go away at the end of December. Some lenders have put the funding cutoffs at the 12/1 or 12/15. Just wanted you to know this in case you have clients looking to use that loan and are trying to determine a closing date—either for a refi or a purchase. There will be a new “conforming” number to replace the current $417k and $475k after the 1st of the year, but that number will also be County based and we don’t know what it is yet.

Behind the scenes, technical numbers are improving, including the LIBOR which has come off its highs. This is an important rate for inter-bank lending and is an indicator of whether the credit freeze is thawing or not. It appears to be improving, so this is good from a big picture stand point. Hope this helps."

Matt Culp, J.D.Mortgage
Broker/Owner
Bainbridge Lending Group
LLC510-LO-27342
matt@blgloans.com

Cool Graphic in NY Times

I love reading the New York Times and Washington Post online to get a national perspective of the real estate and lending markets. There is a great graphic I found today on the Times website. It show change in housing prices plotted over 8 years for 20 cities. There is a 20-city composite overlaid with single-city data. If you check it out, take a minute to click on the Seattle data, then compare it to Las Vegas, southern CA and FL. You see that the Seattle area, while experiencing phenomenal appreciation into 2006, had a much more moderate curve than the other cities in NV, CA and FL. Las Vegas is most pronounced with a steep rise and a corresponding steep fall. The graphic can be found at:

http://www.nytimes.com/interactive/2008/10/28/business/20080624_HOUSING_GRAPHIC.html

Negotiating - Oh the Joy!

Three weeks ago I was in a car accident (actually, the victim of a car accident because I was rear-ended by someone going 30-40 miles per hour while I was stopped!) and find myself in the position of doing a lot of negotiating, post-accident. First, I negotiated with the police officer about his written statement. It reflected only the causing drivers side, and it was not 100% truthful - not even 1% truthful, and the 1% was that she hit me. Next, I negotiated with my insurance company over whether or not my car was totaled. It WAS totaled - completely smooshed is the technical term I like to use. Next, I negotiated over the market value of the car for the settlement with the insurance company. That's where things got fun. Luckily, this process really hasn't been so bad, because it's what I do every day, but applied to real estate. Here's what I kept in mind during the process...

Be Nice. I am a true believer that you will get farther by keeping your cool and treating the person on the other end of the negotiation the same way you would want to be treated. My oldest daughter learned the Golden Rule in preschool when she was 3, and it is a life lesson that is a good idea to keep in mind whenever one feel's like blowing her top.

Be Fair. While I would have loved to get enough money from the insurance company so that I could run out and buy my coveted car of the moment (an Audi Allroad with low miles - have one to sell me?) but that's not realistic. I was driving a 1999 Volvo V70 XC with low miles, and that is what I needed to negotiate the value of. (No pain and suffering included, even though the hassle of this process could be categorized that way in bad moments).

Be Persistent. It took four rounds of negotiation to settle on a fair market value for my totaled car. The insurance adjuster would make an offer, show me comps, and I would refute the comps, provide better ones, and wait to hear back from him. That was how rounds 1 and 2 went. At the end of round 2, I moved on to the adjuster’s supervisor (who had more authority to negotiate upward). Round 3 was similar, but with a higher dollar amount, and for round 4 I made them an offer that was accepted. Turns out it was $1,000 more than I paid for the car 13 months ago (but they don’t need to know that). Persistence pays off. My husband told me he would have stopped at round 3. Good thing he was not part of the negotiation!

Be the “Smartest Person in the Room.” Each night during this process, once the kids were tucked into bed, I spent 1-2 hours researching comparable cars. I wrote emails as to why the comps the adjusters were using were not any good, and supported my argument for the (higher priced) comps I found. I knew more about their comps than they did. It worked.

All my tactics for negotiating for myself on a settlement with my insurance company were learned negotiating for my real estate clients. Negotiation is just one tool in the tool box, but it sure is an important one.

Next step: negotiating a price on a used car. Maybe you’ll see me driving around in that Audi Allroad after all….

Market Update 10.20.08

At heart I am a numbers junkie, but I don't believe in just throwing out statistics with no interpretation. Below are some statistics plus my take on the current real estate market on BI.

Year-To-Date

SINGLE FAMILY HOMES

• Median Sale Price: -10% compared to 2007
• # Sales: -50% compared to 2007

It's not surprising to see the median price down 10%, but activity down 50% compared to the same period last year is staggering, especially with our available housing inventory up by 25%. Where we do see more activity is in the under-600K market. This can be linked directly to the lending market. Conforming loans (up to $417,000) and Jumbo Conforming Loans (up to $475,000 in Kitsap County) have hovered around 6% for months. Jumbo loan rates, on the other hand, are considerable higher. And, the criteria for getting a loan has become much more stringent. While inventory is high, it has passed it's peak. I expect that prices will continue to drop for at least the next 6 months.

CONDOMINIUMS

• Median Sale Price: -16% compared to 2007
• # Sales: -66% compared to 2007

Condominium madness is over. The buying frenzy that started with the Harbor Square Development is long past. Harbor Square now has 20 re-sale condos on the market, ranging in price from $274,900 to $1,195,000. Ouch. More established condominium communities on the Island have done better with getting homes sold, such as Townhomes on Madison, Grow Village, and Vineyard Lane.

VACANT LAND

• Median Sale Price: -33% compared to 200
• # Sales: -64% compared to 2007

Not too many people out there buying land these days. With 44 new construction homes (18% of the available inventory) on the market, builders aren't running out there to buy land and build on spec.

Where does this leave you? If you are selling a home, you need to price aggressively and plan to be patient. If you are buying, get working on your financing before you start looking. If you are doing neither, enjoy your home. It is still a great asset, and real estate is a long-term proposition.

October 17 2008

It has been nearly a year since I have posted. A few weeks back, I responded to a post about the general health of the real estate market on a Yahoo! chat group, Islandmoms. After getting a lot of positive feedback regarding the information I posted, I decided to revisit this blog and get more serious about. Why? For so many people on this island (well, not just Bainbridge Island, but this is where I live and work), their home is their largest asset, not to mention a HOME. It's where we rest our heads at night, have dinner with family, celebrate holidays, play with our children, have coffee with our friends. The uncertainty in the economy and real estate market is worrisome. Information is power, and understanding what's happening can help bring some comfort and relief.

On this blog, I welcome questions and comments. I want to generate discussion and be a resource for answers and real estate information. Let's face it - we get our information online. While I welcome in-person appointments and phone calls, too, most of us go online to get our information these days.

I'll post later this weekend with a market update.