Below is an update on mortgage interest rates, courtesy of Matt Culp of Bainbridge Lending Group. Looking pretty good, but as Matt notes, we don't know what the long term trend on rates will be. So, these rates may be just a flash in the pan, or we could see them go lower:
We had a big drop in rates today as the mortgage market reacts to the Fed’s announcement this morning that they implementing a program to help the mortgage-backed securities market. Not really sure what the particulars are but the lenders liked it.
We are at 5.25% at 1 point on the 30 year fixed and 5.5% at no points. On Friday we were at 5.625% at 1 point and 6.0% at no points. So in a matter of a couple of days, we have had almost a .5% drop in rates.
Not sure how long this will last (we’ve seen these one day wonders before) or if they will go lower.
Matt Culp, J.D.
Mortgage Broker/Owner
Bainbridge Lending Group, LLC
510-LO-27342
206-842-7176 Direct
206-842-1444 Main
206-842-3358 Fax
206-755-6636 Cell
877-755-6636 Toll Free
Tuesday, November 25, 2008
Friday, November 21, 2008
Friday Stats
Here are a few stats I regularly look at:
- 220 single family homes listed for sale on BI in the "active" category
- # houses sold to date down 46% from same time period last year
- Median sale price in 2008 is $603,750 (down 11% from last year)
- Median days on market (time from listing to pending sale) is 71, up 6% from last year
- 30-year fixed rate for a conforming loan (up to $417K) is 5.875%, same as this time in 2007
What does this mean? First, inventory is the lowest it has been since February 2008. That's not surprising, because we are entering the holiday season and this is a typical time for people to take homes off the market to give the listing, and maybe themselves, a rest.
There may be other factors at play, however. For months the sales volume has been hovering around 50% of sales volume last year. Now it is at 46%. Every bit counts.
New Construction - New construction homes deserve some special attention as to there effect on market statistics. While new houses represent 23% of active listings, they represented just 11% of sales in the second half of this year so far. And, new houses actively listed have, on average, been on the market 46% longer than re-sale active listings.
Of note for new construction is the discounting that has happened to reach a sale. Of the 9 new construction houses that have sold since July 1st, on average builders have discounted the price 20% from the original list price. Ouch. This is in a market where the average resale house (non-new construction) sold for just 6% less than listed price.
There are several reasons for the discounting... Builders with too much inventory need to move houses. The new construction price point is a good deal higher than the average re-sale property; with jumbo loans so much more expensive these days, people in the jumbo category need some real price incentive to make a purchase. A hosue that started as a presale was in an entirely different real estate market than when the final product sold.
Do I sound negative? Not my intention by any means. There are bright spots in the market: first time home buyers are getting in at prices we never expected to see again, buyers are negotiating hard and feel like they are getting value, and investors ears are perking up. At least things aren't down 40% like the stock market. 15-20% down in the housing market is starting to look good these days.
Have a great weekend.
Wednesday, November 19, 2008
Where Will Real Estate Rebound?
http://www.forbes.com/realestate/2008/10/29/foreclosure-recession-cities-forbeslife-cx_dp_1029realestate.html
Forbes Magazine (okay, admittedly a little conservative for me) had a recent article regarding US cities most likely and leats likely to see a real estate rebound. Seattle is #1 on the list in the positive column. While Bainbridge is decidely NOT Seattle, the fates of many Islanders are closely linked with the city. The ferries are packed at commute times with Islanders who rely on companies across the water for their livelihoods. Many of our new residents come from Seattle or move here due to a new job in Seattle. Any positive news for Seattle's real estate market is positive for Bainbridge.
Forbes Magazine (okay, admittedly a little conservative for me) had a recent article regarding US cities most likely and leats likely to see a real estate rebound. Seattle is #1 on the list in the positive column. While Bainbridge is decidely NOT Seattle, the fates of many Islanders are closely linked with the city. The ferries are packed at commute times with Islanders who rely on companies across the water for their livelihoods. Many of our new residents come from Seattle or move here due to a new job in Seattle. Any positive news for Seattle's real estate market is positive for Bainbridge.
Tuesday, November 18, 2008
What will it take to get YOU off the fence?
There is an article today in the Seattle Times about incentives that could be offered to home buyers over the next months to get people off the fence and inject some life into the national real estate market. http://seattletimes.nwsource.com/html/realestate/2008392490_harney16.html
The incentives proposed come in the form of interest rate buy-downs (subsidized by the federal government) and down-payment tax credits.
Some of the ideas being pushed by lobbying groups seem a little far-fetched (interest rate of 2.99% for people who make a purchase before July 1, 2009) but the basic ideas could be just what are needed to get things moving in the right direction.
How to put this in terms that translate to the Bainbridge real estate market? Follow my process below…
In the past 6 months, the median sale price of a home on Bainbridge Island was $576,000. Assuming a 20% down payment and a 6% interest rate for a 30-year fixed rate loan, the monthly principle and interest payment would be $2762.73. Over the life of the loan the interest paid to the lender would be $533,781.20. Now, if there was a federal subsidy to buy the rate down by 1%, as discussed in the article, the numbers would be: monthly principal and interest payment of $2,473.67 ($289.06 less per month) and the interest over the life of the loan would be $429,724.60, a difference of more than $104,000.
The $100,000 savings over the life of the loan is a pretty staggering number. And for many people, a difference of nearly $300 per month really does make a difference in their lives. Put that in terms that are real to your monthly budget: a car payment, a proportion of child care costs, home heating, etc. I don’t know many people who are in the market for a median-priced home that couldn’t use an extra $300 per month.
What about those of us (me included) who bought a house in the last 2 to 3 years and have seen our house values fall? I think we would all benefit from incentives that got the housing market moving again. Such incentives will help things move along and stop the freefall of housing prices, followed by an eventual appreciation of the asset. This will be good for our entire economy, not just the housing sector.
The incentives proposed come in the form of interest rate buy-downs (subsidized by the federal government) and down-payment tax credits.
Some of the ideas being pushed by lobbying groups seem a little far-fetched (interest rate of 2.99% for people who make a purchase before July 1, 2009) but the basic ideas could be just what are needed to get things moving in the right direction.
How to put this in terms that translate to the Bainbridge real estate market? Follow my process below…
In the past 6 months, the median sale price of a home on Bainbridge Island was $576,000. Assuming a 20% down payment and a 6% interest rate for a 30-year fixed rate loan, the monthly principle and interest payment would be $2762.73. Over the life of the loan the interest paid to the lender would be $533,781.20. Now, if there was a federal subsidy to buy the rate down by 1%, as discussed in the article, the numbers would be: monthly principal and interest payment of $2,473.67 ($289.06 less per month) and the interest over the life of the loan would be $429,724.60, a difference of more than $104,000.
The $100,000 savings over the life of the loan is a pretty staggering number. And for many people, a difference of nearly $300 per month really does make a difference in their lives. Put that in terms that are real to your monthly budget: a car payment, a proportion of child care costs, home heating, etc. I don’t know many people who are in the market for a median-priced home that couldn’t use an extra $300 per month.
What about those of us (me included) who bought a house in the last 2 to 3 years and have seen our house values fall? I think we would all benefit from incentives that got the housing market moving again. Such incentives will help things move along and stop the freefall of housing prices, followed by an eventual appreciation of the asset. This will be good for our entire economy, not just the housing sector.
Wednesday, November 12, 2008
Something Uplifting
Be the change you want to see in the world. -Mahatma Gandhi
Now I just have to figure out how this quote is related to real estate... Any takers?
Now I just have to figure out how this quote is related to real estate... Any takers?
Home Pricing: Denial is not a River in Africa
A colleague emailed me this link and I think it's worth posting: http://www.msnbc.msn.com/id/27648884/from/ET/. Denial of the reality of depreciation in housing values is happening all over the US, and there is some of that on Bainbridge Island too. Any scan of housing inventory and you will note some prices that seem really out of whack.
What I don't like about this piece is the tone it sets of "us vs. them" between real estate professionals and home sellers, as if the real estate professionals have cornered the market on reality while homeowners are living in la-la land. I have more respect for my clients. While the reality is not pretty, I find that my clients really do get what's going on. Some are benefitting from the decline in home values: first time homebuyers, investors, and people who sold in a higher market and who have been in a holding pattern watching for the right time to act and make a pruchase. For those planning to make a move from one house to another, they are selling low, but buying low, too. It is the people who are selling who have watched their asset decline who are really hurting. Taking an "us vs. them" approach is just not my style, and you'll never hear it from me. I'm more of a "rip off the bandaid" type of person. If there's bad news, I'll just tell you. Better to be up front and figure out how best to deal with the bad news for the greatest benefit or conversely, for the least amount of pain.
I'll try to post something more uplifting later.
What I don't like about this piece is the tone it sets of "us vs. them" between real estate professionals and home sellers, as if the real estate professionals have cornered the market on reality while homeowners are living in la-la land. I have more respect for my clients. While the reality is not pretty, I find that my clients really do get what's going on. Some are benefitting from the decline in home values: first time homebuyers, investors, and people who sold in a higher market and who have been in a holding pattern watching for the right time to act and make a pruchase. For those planning to make a move from one house to another, they are selling low, but buying low, too. It is the people who are selling who have watched their asset decline who are really hurting. Taking an "us vs. them" approach is just not my style, and you'll never hear it from me. I'm more of a "rip off the bandaid" type of person. If there's bad news, I'll just tell you. Better to be up front and figure out how best to deal with the bad news for the greatest benefit or conversely, for the least amount of pain.
I'll try to post something more uplifting later.
Tuesday, November 11, 2008
Bainbridge Market: Volume
For months, sales of single family homes on Bainbridge Island has been hovering at 50% of last year's sales volume. On the instinct that activity is up, I checked the numbers in the MLS and found 37 houses to be in contract between buyer and seller, 8 of which are contingent upon the sale of the buyer's home. Assuming all 37 sales close escrow by the end of this year and no other sales occur, sales volume will finish down only 41%. No reason to throw a "Real Estate Market Recovery" party, but heading in the right direction.
Recognizing a Deal
In round 2 of my car negotiating, I set out to find a replacement for my car that was totaled last month. Me being me, I had to learn a lesson in the process. More on that later…
My search was quickly narrowed to getting the same type of car (a Volvo V70 Cross Country station wagon). My guilt about the gas mileage was outweighed by my need for a super safe car. After getting hit from behind by someone going WAY too fast, I realize that I don’t always have control of what happened when I am driving so I need to put myself, family and clients in a car I feel will perform well in the worst of circumstances. Knowing I wanted to buy a used car, my next criteria was low mileage. Any candidate for purchase also had to have leather seats (easy to clean) and be in like-new condition inside and out.
It took a couple of weeks but I finally found something on Craig’s List that seemed perfect on paper. After emailing with the owner I decided to take it for a drive. It was as good in person as the ad and emails stated, and everything checked out beautifully with a mechanic.
Deciding what to offer was the hardest part. The car was already well-priced, compared to everything else I had looked at and Kelley Blue Book values (www.kbb.com); Kelly Blue Book is a great resource for retail, private party, and trade-in values for used cars. The car was already 28% below Blue Book retail value, and 10% below Blue Book value for private party transactions. However, I knew I would not be happy paying full asking price because I had cash. As with real estate transactions, I expected a discount for being able to write a check and close the deal fast. So, I offered what I felt would not be an insulting price, the seller made a counteroffer, and I told him I would be there the next day with a check half-way between his asking price and my original offer. We agreed and I now have a great car that was a third less than what a dealer price would have been, and 14% less than the Blue Book private party value.
What was my lesson? Recognizing a good deal and be willing to take it. When I found the car on line, it seemed like a great value. While I did expect a small price reduction in return for my cash, there was no point in beating up the seller. Ask for too much of a discount and I risked him not wanting to sell me the car at all. And, I needed a car.
I see the scenario I went through played out with real estate. As home values decline, buyers know they are holding most of the cards. Even when a house appears well-priced by al objective measures, buyers still want to negotiate. Realistic sellers will make deals, as long as they make sense and there is some fairness attached to the negotiation. And as always, cash is king. Finally, just as I needed a car to get around (I couldn’t rely on the good will of the friend who had loaned my family an extra car forever) people need to put rooves over their heads.
My search was quickly narrowed to getting the same type of car (a Volvo V70 Cross Country station wagon). My guilt about the gas mileage was outweighed by my need for a super safe car. After getting hit from behind by someone going WAY too fast, I realize that I don’t always have control of what happened when I am driving so I need to put myself, family and clients in a car I feel will perform well in the worst of circumstances. Knowing I wanted to buy a used car, my next criteria was low mileage. Any candidate for purchase also had to have leather seats (easy to clean) and be in like-new condition inside and out.
It took a couple of weeks but I finally found something on Craig’s List that seemed perfect on paper. After emailing with the owner I decided to take it for a drive. It was as good in person as the ad and emails stated, and everything checked out beautifully with a mechanic.
Deciding what to offer was the hardest part. The car was already well-priced, compared to everything else I had looked at and Kelley Blue Book values (www.kbb.com); Kelly Blue Book is a great resource for retail, private party, and trade-in values for used cars. The car was already 28% below Blue Book retail value, and 10% below Blue Book value for private party transactions. However, I knew I would not be happy paying full asking price because I had cash. As with real estate transactions, I expected a discount for being able to write a check and close the deal fast. So, I offered what I felt would not be an insulting price, the seller made a counteroffer, and I told him I would be there the next day with a check half-way between his asking price and my original offer. We agreed and I now have a great car that was a third less than what a dealer price would have been, and 14% less than the Blue Book private party value.
What was my lesson? Recognizing a good deal and be willing to take it. When I found the car on line, it seemed like a great value. While I did expect a small price reduction in return for my cash, there was no point in beating up the seller. Ask for too much of a discount and I risked him not wanting to sell me the car at all. And, I needed a car.
I see the scenario I went through played out with real estate. As home values decline, buyers know they are holding most of the cards. Even when a house appears well-priced by al objective measures, buyers still want to negotiate. Realistic sellers will make deals, as long as they make sense and there is some fairness attached to the negotiation. And as always, cash is king. Finally, just as I needed a car to get around (I couldn’t rely on the good will of the friend who had loaned my family an extra car forever) people need to put rooves over their heads.
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