The odds of selling a home in the Redmond and East Bellevue areas stood at 30%, which also was the strongest absorption rate to be found on the eastside.*  Chances of selling ranged from 19-26% in the other eastside cities.

 
The Redmond and East Bellevue area near Microsoft comes out on top for market time and a higher absorption rate because of more affordable housing, good jobs, an easier commute and good schools.  With the main Microsoft campus in Redmond right on the Bellevue line, there are lots of jobs right there.  In addition, there’s easier freeway and bus access to Seattle than in the outlying suburbs.
 
The higher price point in West Bellevue means fewer buyers can afford to live there.  Affordability issues increase the market time.  Longer market time here is a function of pricing, not desirability.  West Bellevue is considered to be one of the best locations on the eastside.
 
Two of the areas had an increase in the median pricing, Redmond and East Bellevue and Redmond and Education Hill.  Changes in median pricing, however, need to be looked at over a period of months since the median price for this month reflects the sales for this month only.
 
Why is market time important?  It’s one indication of the desirability and affordability of an area.  Both are key to future growth and appreciation.  People like to live in convenient areas with good schools and affordable housing.
 
The cities below are grouped together to follow our MLS areas (multiple listing service) and shows how our statistical information is  reported.  How did your city do this past month?
 
Which Seattle-eastside city had the fastest selling homes in October, 2011?
 
1. Redmond/East Bellevue

The odds of selling a home were 30%.*

Median sales price increased (y-o-y)** to $435,000 from $427,000.

193 homes were for sale

A total of 58 homes sold.

Days on the market: 56
 
2. Kirkland

The odds of selling a home were 26%.

Median price decreased from $592,000 to $501,000.

234 homes were for sale.

A total of 60 homes sold.

Days on Market:  99
 
3. Redmond/Education Hill/ Carnation

The odds of selling a home were 19%

Median pricing increased from $541,000 to $580,000.

321 homes were for sale.

A total of 62 homes sold.

Days on Market: 100
 
4.Woodinville/Bothell/Kenmore/Duvall/North Kirkland

The odds of selling a home were 22%.

Median price was down from $377,000 to $370,000.

540 homes were for sale.

A total of 117 homes sold.

Days on Market: 101
 
5. South Bellevue/Issaquah

The odds of selling a home were 24%.

Median price decreased from $580,000 to $500,000.

338 homes were for sale.

A total of 81 homes sold.

Days on market: 104
 
6. The plateau:  Sammamish, Issaquah, North Bend, and Fall City

The odds of selling a home were 23%.

Median sales price decreased from $500,000 to $460,000.

There were 650 homes for sale.

A total of 158 homes sold.

Days on the market: 108
 
7. West Bellevue

The odds of selling a home were 22.5%.

Median pricing decreased from $985,000 to $878,000.

128 homes were for sale.

A total of 31 homes sold.

Days on Market: 117

Interest Rate chart 8-1-11

It’s hard to believe that rates are as low as they are these days.   If you’re not buying, think about refinancing your home.   I just refinanced my home with a 7 year arm for 3.1%!  It lowered our monthly payments by $300.

An adjustable mortgage may not work for everyone, but with fixed rates in the low 4% range, there’s a huge savings that can be had there, too.

Buying or refinancing a home or condo now is not for everyone.  Unfortunately, some people may not want to or are not in a great position right now to do either.  But if it something you’re considering, then check out what the payback would be based on the number of years you might stay in your home.  If you plan to be in your home for a while, it could very well be worth refinancing.  Talk to a mortgage professional you trust to help you decide if it’s worth taking advantage of these great rates.

Should buyers be required to have a 20% minimum down payment in order to purchase a home?  Is this the answer?   Lawmakers in the other Washington, not here in Seattle, are looking into this issue.   Congress is currently looking at the Quality Residential Mortgage issue:

As federal regulators wrestle with setting the definition of a qualified residential mortgage (QRM)–which under the Dodd-Frank Wall Street Reform Act would be exempt from risk-retention rules–a bi-partisan group of U.S. House and Senate lawmakers urged regulators not to be rigid in setting the rules.

Some people might think a large down payment provides more insurance that a buyer can handle the mortgage.  After all, if the buyer had the discipline to save a significant amount of money, then the buyer should have the discipline to make mortgage payments.  This is true, discipline is required to save a substantial down payment.

But was the lack of a 20% down payment the main source of failed mortgages and the housing meltdown?

From the truth about mortgage blog:

Mortgage default is not related as much to a high monthly payment, but to the depreciation of home values and higher unemployment.

A report released by the Boston Fed last week found that home price depreciation is a leading cause of mortgage default, challenging common arguments that attribute rising delinquencies to unaffordable mortgage payments.

“We find that the DTI ratio at the time of origination is not a strong predictor of future mortgage default,” the report said.   “A simple theoretical model explains this result.”

“While a higher monthly payment makes default more likely, other factors, such as the level of house prices, expectations of future house price growth and inter-temporal variation in household income, matter as well.”

The economists estimated that a 10 percentage-point increase in the debt-to-income ratio increases the probability of 90-day delinquency by just seven to 11 percent.

Conversely, a one percentage-point increase in unemployment rate raises this probability by 10-20 percent, and a 10 percent fall in house prices raises it by more than half.

From Senator Johnny Isaksen:

“We don’t have a down payment problem in this country, but rather an underwriting problem. I strongly urge regulators to rework their overly rigid down payment requirement for QRM. If left as is, it would make recovery in the housing market almost impossible.”

What happens to those who wish to buy a home, but don’t have the down payment?

Federal regulators have proposed a rule that would require most borrowers to come up with a 20% down payment on a home purchase. Buyers with less than 20% to put down would have to choose between higher fees and rates — up to 3 percentage points more — compared with folks who have the 20% or a 16-year delay while they save up the necessary down payment.

That’s how long it would take the typical American family to save enough money for a 20% down payment and closing costs, according to estimates of 2010 median income and home prices from the NATIONAL ASSOCIATION OF REALTORS® and the 2010 national savings rate.

When I read the excerpts from these other blogs, I’m seeing declining house values, unemployment, and bad underwriting as the causes for the financial meltdown.  My vote goes to bad underwriting as the main culprit.    I’m not seeing a low down payment as the culprit.  Everyone knows that changes  are still needed for our financing rules, but is the 20% down payment the answer?  If you think, no, then please alert your congressional representatives in Washington.

Here in Washington State you can contact:

Senator Patty Murray

Senator Maria Cantwell

Rep. Jay Inslee

Rep. Rick Larsen

Rep. Jaime Herrera Beutler

Rep. Doc Hastings

Rep. Cathy McMorris Rodgers

Rep. Norm Dicks

Rep. Jim McDermott

Rep. Dave Reichert

Rep. Adam Smith

Apparently, it’s a common question or misconception. Courtney Cooper Jacobs had been asked the same thing by one of her clients.  She did some research and linked to Matt Stigliano’s blog, which did a great explanation of the future tax with some real world examples.

Yes, Virginia there will be a new tax but only for a “chosen” few. But no, it’s not a sales tax on real estate.  It’s a Medicare tax and only applies to certain people and homes. Most home sellers will not pay any additional tax.  Those that pay are the fortunate people who are high earners and have also made a killing on the sale of their home.   And, if there is a tax that applies,  it will only be a small percentage of the sales price.

From Matt Stigliano’s blog:

The new Medicare tax on real estate sales is actually a tax on investment income for so-called “high earners.”

With that in mind, a 3.8% Medicare tax on the sales of a $400,000 home would be $15,200, which is a lot of money to pay in tax. This is where many people’s calculations have gone astray however, as the real estate “sales tax” is not on the entire amount of the sale. Instead it is on the amount of income that exceeds the capital gains threshold ($500,000 for married couples filing jointly, $250,000 for single filers).

The income requirements are clearly spelled out in order to define “high earners” – $250,000 for married couple filing jointly, $125,000 for couples filing separate returns, and $200,000 for everyone else. If your income is above these levels, you will be paying a new tax on investment income. If it falls below that, you will not be taxed.

This medicare tax does not go into effect until 2013.  So I hope this clears the air for you.  It’s really not as bad as may people have been lead to believe.

Twenty percent of the country is having financial difficulties with job and home losses

What about the other 80%? We often forget about what’s happening with the other 80% of the population.  These people need to think wisely and make some solid financial decisions. If you own a home, Greg Heberlein recommends making an additional mortgage payment each year. You can drastically cut down the time you’re paying your mortgage, PLUS save a lot of money. We’ve heard this before, but it hasn’t been mentioned in a long time.  It’s good financial advice.

Here’s a few key thoughts from his talk:

• One payment a year can lower a 30 year fixed mortgage by as much as 8 years.
• One payment a year can lower a 15 year fixed mortgage by almost 5 years.
• Despite the tax deduction, you’re still better off being as debt-free as possible.
• The last 3-6 years of a mortgage payment have such a small interest amount, it often doesn’t allow for a deduction anyway.
• By being as debt-free as possible, it increases one’s cash flow.

There is much negative publicity about ARM loans.  But, did you know that the FHA 5 year ARM has many advantages which could enable a buyer to buy more or save more in their monthly payment.  One of the  unique features to an FHA ARM is that the adjustment cap after the initial 5 year term is only 1%.  Compare a 5 year ARM at todays’s rate of 2.875% versus a 30 year fixed rate mortgage at 4%.  If you assume a worst case scenario, the average interest rate over 9 years is 3.99% on the ARM.   Many first time home buyers do not plan on staying in a property more than 5-6 years.  The FHA ARM could save them thousands of dollars over this time frame.

Maximum Increase in FHA ARM interest Rates Over 9 Years

Or, it could allow them to purchase a more expensive property without increasing your monthly payment:

Increase Your Purchasing Power With FHA ARM

You can contact Steve or your loan officer to learn more abut FHA ARMs.

Seattle-Eastside Residential Real Estate Sales, July 2010

The odds of selling a home on the Eastside in July, 2010 ranged from a low of 11.5% to a high of 17%, with an average 14% absorption rate.(The absorption rate is the number of homes for sale in a month divided by the actual number of homes sold that month.)

July, 2010               3468  homes for sale     501 homes sold                  14% odds of selling.

June, 2010              3360 homes for sale     475 (was 503)  homes sold       14%(was 15%) odds of selling.*

May, 2010               3209 homes for sale     492 homes sold        15% odds of selling.*

July, 2009               3819 homes for sale     516 homes sold        13.5 % odds of selling.

June, 2009              3859 homes for sale     563  homes sold         15% odds of selling.

*Adjusted from previous month’s numbers to reflect the actual number of homes sold and closed. Each month some sales  fall apart and don’t close.  A lower number of home sales may be reported at a later date to show the actual number of sales that did close.

For the past few months, the absorption rate for all the Seattle-eastside areas has been in the teens, hovering around 13-15%.   May, June, and July all had similar absorption rates.  Since May of 2009, the number of homes that have sold each month has not varied all that much, with the exception of March and April of this year. March and April had higher sales because of the tax credit.

Where we see more of a difference is in the number  of homes for sale on Seattle’s eastside.  Last year  there were 3819 homes for sale in July, 2009.  This year there are 10% less homes on the market.  But even with less homes on the market, the odds of selling are about the same.

We have the lowest interest rates since 1971.  Plus, our Seattle eastside real estate market is clearly a buyers’ market again, since the absorption rate is so low.  It’s very obvious when shown on a map of the area. I’ll  post a map of the Seattle eastside showing where buyers and sellers markets are located later this week.  The reality is, however, that most of the real estate markets are buyers’ markets right now.

So why are real estate sales so sluggish? My guess is the “fear factor.”  People are still worried about the economy.  Plus, with interest rates predicted to remain low for the foreseeable future, there’s also no sense of urgency to buy.

Why do you think the Seattle eastside real estate market is slower?

_____________________________________________________________

July, 2009 Seattle-Eastside real estate market compared to July, 2010:

• The average asking price of pending homes (recently sold homes) went from $558,397 to $573,617. (This does not show what the homes actually sold for.)
  
• This week, there were 14,414 King County homes (houses and condos) for sale.
  
• Two weeks ago  may have been the peak of the number of homes for sale this year when 14,639 homes were on the market.
  
• Home sales on Seattle’s Eastside:   down 13%.
  
• Number of homes for sale on Seattle’s Eastside:  down 10%
  

Best odds of selling: Carnation and Redmond, from downtown to north and east, with 17% of the homes getting accepted offers. Ironically, last month this area had the worst odds of selling at 9%.

Worst odds of selling: West Bellevue, with 11.5% of the homes getting accepted offers.

Biggest increase in sales from last year: A 5% increase in South Bellevue home sales, which is the biggest increase.

Smallest increase in sales from last year: Kirkland, with a 3% increase.  There were only two areas with an increase in the number of home sales on Seattle’s eastside.

Decline in real estate sales from last year: There was a decline in 5 out of the 7 Seattle-eastside areas with the largest decline in home sales  in West Bellevue with a 31%  decline in the number of homes sold.

The peak of homes for sale in 2008: July,  4370 homes.

The peak of homes for sale in 2009: June,  3859 homes.

The number of eastside homes for sale at the start of 2010: 2584 homes

The number of eastside homes for sale in July, 2010: 3468 homes.

Rate of home sales that failed and did not close: 6%

For a picture of King County sales, check out The Seattle Times. The headline states sales are down, but prices are up.  Keep in mind the headline may not represent each area.  Prices are up slightly in some areas, down in others, and sales are down in 5 out of 7 eastside areas.

Which Seattle-eastside areas have remained stronger as a balanced market between buyers and sellers?

East Bellevue and Redmond near Microsoft (530 on the map)

It’s traditionally one of the strongest areas, because homes are so close to jobs at Microsoft.  The neighborhoods abut the main Microsoft campus and are an easy commute to downtown Bellevue, the economic hub of the eastside.  Plus, housing can be found from the $200′s and $300′s to million+ dollar waterfront. Housing in many neighborhoods is in the affordable range for the area.

South Bellevue and Issaquah (500 on the map)

The area south of I-90 is a big drawing card for Seattle commuters.  Again, there’s a variety of home styles and ages, good schools, and a fabulous commute either to eastside economic centers or downtown Seattle.

Sammamish, Issaquah, Preston, Fall City, and North Bend.  (540 on the map)

Another area that’s consistently one of the strongest is the plateau areas of Sammamish, Issaquah, Preston, Fall City, and North Bend.  The different eastside cities here have a huge variety of homes from estates to acreage to newer construction and town homes.  Good schools and some good values keep the area strong.

King & Snohomish County Real Estate Maps, 6-30-10

There are still great homes and condos out there to buy and interest rates are at historic lows. The loss of the tax credit may not make much of a difference when calculating the savings in monthly payments over time.

Interest Rates 1980-2010

I remember when I bought my first home in the mid 1980′s.  I was so excited, the interest rate was at the bottom of the double digits, considering what the early 80′s had to offer with rates in the high teens.  I had friends who purchased in Brooklyn, NY in the early 80′s and were paying almost 17% for their mortgage.  The interest rate for my first home was just above 10%.  Granted the home prices were significantly less, but the monthly payments were high, considering the lower prices of the times.

Fast forward to 2010, with interest rates the lowest in 30 years and prices at 2005 levels.

What’s the difference in monthly payments with the more recent interest rates we’ve seen?

If you decide to purchase a $400,000 home, this is the difference in principle and interest payments over the last couple of years.

July 2008 – 5.75%  – $2,334
July 2009 – 5.25%  – $2,209
Jan  2010 – 5.125%- $2,178
May 2010 – 5.0%   – $2,147
July 2010 – 4.50%  – $2,027

Seattle-eastside home values have dropped significantly since the peak in the real estate market in the summer of 2007 and rates have also dropped as well.  If you were to purchase a $400,000 home now, the payment would be approximately $300 less than two years ago, plus the home prices are also lower.  In King County, WA, the choices are terrific because the number of homes for sale is just below the high so far for the year.  Right now, in King County, there are 13,921 homes for sale.

So is it the right time to buy a home?  You decide.

People were talking on the Wall Street Journal site and on Zillow about this very issue.  Today people don’t just ask, “How’s the real estate market?”  They ask, “What do you think will happen to the real estate market after the tax credit?”

Here are some of the things people are wondering:

• Do I buy now?
• Do I wait?
• Will I get a better deal now or if I wait?
• Is it worth passing on the tax credit and waiting to see if prices come down after April 30th?
• Is it better to buy now because there is a healthy number of homes for sale and good interest rates?
• Will there be more homes to choose from later?
• Will interest rates go up and cancel out any possible decline in prices?

I got my crystal ball out as did many others. Money Magazine made a strong case for buying now. Warren Buffett, on the other hand, thought the real estate market would pick up in 2011. Luke Mullins of US News and World Report presented the positive aspects of home ownership, even in today’s real estate market. Truthfully, no one knows what will happen and we can only speculate about what may happen with prices, the number of homes on the market and interest rates.  But all these variables should be considered when making a decision about whether to purchase a home now or later.

I believe there are good deals on a home now and will be after the tax credit, but it’s on a case by case basis.   Here’s why I say this:

Right now…

$6500-8000 home buyer tax credit available for most buyers.

Historically low interest rates.

Good selection of homes, many with very realistic home sellers and prices.

Having the tax credit of $6500-8000 and terrific interest rates,  increases buying power.  Typically, your loan payment is amortized over 15 or 30 years,  a lower interest rate means more dollars per month in your pocket.

Later…

Will prices drop after the tax credit goes away on April 30th?  No one really knows. There may be more homes on the market, which we typically see in the summer months in the Seattle area.  If so, the law of supply and demand will kick in.  More homes + less demand= lower prices.  But we really don’t know if this will happen.  We don’t know if there will be less demand. We can only guess.  We can only gamble on what may be.

However, there’s a good chance  interest rates will go up, which means purchasing power will go down. If rates go up 1%, then purchasing power goes down by about 10%.  This means if you could afford a home for $330,000, if rates do go up by 1%, you would then qualify for a home at $300,000.

The impact of interest rates on buying power

Buying a home will, obviously, be less expensive if prices drop (but we don’t know if they will),  and mortgage rates could also be a higher ( again, just a guess, but looking pretty certain), which could more than cancel out any savings in the price of the home.  Remember,  I’m not just talking about your initial investment, I’m talking about spreading the total cost out over the time you own your home.

The location factor:

Real estate is hyperlocal. There is no one size fits all real estate locales, individual buyers or individual sellers.   Some areas of the Seattle- eastside real estate market will remain stronger than others.  Within each city on the Eastside, Bellevue, Redmond, Kirkland, it will vary.   The East of Market neighborhood in Kirkland may be vastly different than Kirkland’s Rose Hill real estate market.  We see that today with a difference in real estate sales performance in different areas on Seattle’s eastside.  So no one should make a “one size fits all” about the real estate market.  It will depend on how hot the area is, how many homes are on the market, and how hot the house may be. ( The Queen Anne neighborhood in Seattle seems to remain hot through most real estate markets, as an example.)

Some neighborhoods will be full of homes for sale and the homes in these areas will need to be priced more competitively.  Other areas will have fewer homes to buy.  These areas will have stiff competition among the sellers to grab the buyers.  Buyers will be looking harder at the overall value each home brings them.

The home factor:

In every real estate market, you’ll find fabulous homes.   These homes will be perfect, priced right, and terrific values.  Homes that shine will be the ones to sell in any market.

The emotional factor…

For most people, it’s a huge personal decision when to buy and what home to buy.  If you find a great house and are able to get it for a reasonable price for the real estate market at the time, it may make sense to you to buy.  There are the financial aspects of buying a home and the emotional aspects.  You might find the home you can’t live without and it’ll be worth it to you to buy now rather later.  You may not find a home now and miss using the home buyer tax credit, but you may not want to buy a home now just to get the tax credit.

There are going to be great homes now and in the future.  There are also going to be great deals now and in the future.  The difference in today’s market is you’re dealing with a known quantity.  You have to decide what works for you.

What do you think will happen with the Seattle-eastside real estate market later this year?