Northwest Multiple Listing Service members reported 6,103 pending sales during November, marking the seventh straight month of double-digit year-over-year increases.

Last month's total number of mutually accepted offers was 22.4 percent higher than the same month a year ago. It also marked the first month since December 2006 that the number of pending sales surpassed the number of new listings (6,043), prompting discussions of possible inventory shortages.

"As we head toward the end of the year, it's certainly good to see a healthy number of buyers relative to the available inventory for sale," said Mike Grady, president and chief operating officer of Coldwell Banker Bain. "In fact," he noted, "there are some desirable neighborhoods in urban core areas where the case could be made there are too few homes currently for sale."

At month end, there were 30,650 residential listings in the MLS inventory across 21 counties, down nearly 17 percent from a year ago. For the listing service map areas covering Seattle, the database shows a year-over-year drop of about 32 percent.

"Entering the New Year, the Seattle metro area will start off with a shortage of inventory in both the more affordable and mid-priced ranges," suggested J. Lennox Scott, CEO and chairman of John L. Scott Real Estate. He noted a high percentage of sellers are receiving offers within the first month or two of listing their homes.

Despite the smaller selection, the listings in the MLS database covering all counties span a wide price range: 400 homes are priced at $50,000 or less and 65 residences are listed at $5 million-plus.

For homes and condominiums that sold last month, the median selling price was $225,000, down 10 percent from the year-ago median price of $250,000. Single family home prices were off 8 percent from a year ago ($234,612 versus $255,000), while condo prices slipped more than 17 percent ($169,000 versus $204,500).

Brokers point to distressed properties, which tend to be deeply discounted, as a primary cause of lower prices.
 
Bank-owned homes continue to put downward pressure on pricing, reported Northwest MLS director Matt Deasy, general manager of Windermere Real Estate/East, Inc.

For the four-county Puget Sound region, a check of the Northwest MLS database shows more than one-fourth (26.8 percent) of the single-family homes that sold last month were classified as distressed, up from the year-ago figure of 21.9 percent.

For the MLS market overall (21 counties), the number of closed sales jumped 36.2 percent, rising from 3,583 completed transactions during November 2010 to last month's total of 4,879.

"Home prices continue to get dragged down by foreclosures and short sales, which is disappointing given how strong home sales are," said OB Jacobi, president of Windermere Real Estate. "We probably won't see drastic changes in prices until the banks work through the distressed inventory," he noted, adding, "but we expect the pace of this process to pick up over the next several months, so hopefully by this time next year we'll be singing a different tune."

Kitsap County was one of the few areas to register a price gain. The median sales price edged up slightly more than 1 percent, from $230,000 to $232,500. "One month does not make a trend," acknowledged MLS director Frank Wilson, while noting the change in direction to a positive number is encouraging.

Wilson, the branch managing broker at John L. Scott's Poulsbo office, expects Kitsap County will benefit from last week's surprise announcement of a contract extension between Boeing and the Machinists Union, since Kitsap often feels an echo effect of what happens on "the other side." If ratified, he said the contract "will definitely help our area (particularly the northern part) in the long run as buyers will continue to see a significant price difference between Seattle-side real estate and what they can buy in Kitsap." (According to Northwest MLS data, the median asking price on current listings of single family homes in Kitsap County is $289,000, while in King County it is $370,000, about 28 percent more.)

The "fantastic, recent news coming out of Boeing is going to secure thousands of jobs in the area," said J. Lennox Scott. With that news, combined with momentum from other major area employers, "we are seeing solid, renewed demand for local housing," he remarked. Job growth, historic low interest rates and an elevated number of residential investors taking advantage of favorable market conditions are contributing to "a healthy level of sales activity, one of the best in the nation."

One of the sub-markets with vigorous activity is North Seattle, reported Mike Grady. The number of homes currently in escrow nearly matches the number still available for sale, a condition not seen since the boom years of 2005 and 2006, according to his analysis. He is also encouraged by the small ratio of distressed properties. Grady said fewer than 6 percent of North Seattle properties waiting to close escrow are ‘short sale' transactions, which he said is "a positive trend our brokers will be keeping a close eye on in the weeks and months ahead."

Northwest MLS director Wilson cautioned some of the statistics for November and December should be viewed "with a grain a salt." Buyers and sellers tend to think more about family time and the holidays, and sellers may choose to postpone listing their home until the New Year, or take them off the market during the holiday season, he explained.

Although some sellers, buyers and brokers "check out" during the holidays, Wilson said there is an interesting dynamic that takes place. Houses that are on the market are being looked at by more motivated buyers, buyers who are very focused, he noted. "This is an interesting dynamic that happens every year," he added.

Wilson's observation is bolstered by findings from a Realtor.com survey, which found the vast majority of respondents, 79 percent, said more serious buyers were one of the biggest benefits of listing during the holidays. Less competition was an advantage cited by 61 percent of the survey respondents. The majority of respondents, 74 percent, said pricing a home to sell is even more important during the holidays, while an even higher number, 80 percent, said online listing photos were particularly crucial since buyers visit fewer open houses and sellers are less inclined to schedule them during the busy holiday season.

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 22,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.

Thanks to declining prices and record-low interest rates, houses in King County are more affordable now than they've been in at least 17 years, a new score card says.

The county's "housing affordability index" score, a measure devised by the Washington Center for Real Estate Research at Washington State University, hit a record high of 127 in the third quarter.

That means a typical family's income was 27 percent higher than what it needed to make payments that won't bust the household budget on a median-price house.

The third-quarter score topped the previous high of 124.6, recorded in the second quarter of 1998. The all-time low — 65 — came in the third quarter of 2007, when home prices reached their peak. The median price of existing houses resold in King County in July, August and September that year was $472,000.

The median price for the third quarter this year was $350,000, the center's latest score card says, down 10.3 percent from the same quarter last year.

Interest rates also hit new lows, said Glenn Crellin, the center's director, and the county's median family income — despite persistent high unemployment — remained relatively stable.

"You put those three together and you get greater affordability," he said.

The median price of houses sold in King County in October — a month not included in the calculations — fell to a new post-bubble low of $320,000, according to Northwest Multiple Listing Service statistics released last week.

If that signals a trend, it could push the affordability score even higher, Crellin said.

To calculate the index score, which it has tracked since 1994, the center plugs in the county's median family income (a measure that excludes one-person households), the median price of all resold houses (not including new construction or condos), and the average interest rate on mortgage loans.

It assumes a 20 percent down payment and a 30-year fixed-rate mortgage. It also assumes 25 percent of the family's income will go to pay principal and interest.

Snohomish County's third-quarter affordability-index score was 171.5. It was 185.4 in Pierce County, 160.7 statewide.

Interest rates are the big driver in improving affordability, said Tim Ellis, who writes the real-estate blog Seattlebubble.com.

Prices have slipped to 2004 or 2005 levels, he said, but higher interest rates back then meant buyers were paying more each month on conventional mortgages.

"It's a great time to buy if you want to keep your monthly payments low," Ellis said.

By some measures, it's now cheaper to own than to rent in the Seattle area. Mortgage payments for median-priced condominiums are 35 percent lower than rent for the average two-bedroom, two-bath apartment in King County, apartment-research firm Dupre + Scott said in its October market report.

The standard mortgage payment on median-priced houses sold in the county in September is $400 a month less than rent on the typical house, it added.

But monthly payments aren't the only consideration when people decide whether to buy. Financing remains a problem for many, Dupre + Scott said, and many consumers, especially younger people, value the flexibility of renting.

Then there's the continuing slide in home prices. That makes some potential buyers hesitate, Ellis said — especially when they realize that just to break even, they must sell their homes for about 10 percent more than they paid to cover commissions, taxes and other closing costs.

Homeownership is dropping and will continue to do so, Brian Fritz, a vice president with apartment developer Avalon Bay Communities, said at a real-estate industry breakfast this week.

That's partly because more people who could buy are choosing to rent, he said: "They tell me, 'Why would I buy something that will be worth less tomorrow?' "

In addition to its overall housing-affordability index, the Center for Real Estate Research calculates an index for first-time buyers. That one assumes a lower down payment, slightly higher interest rate, lower income and less-expensive house.

King County's third-quarter score was 67.5, suggesting affording a starter home remains a challenge for many.

Still, it's probably less challenging than in the third quarter of 2006, when that index hit an all-time low of 38.6.

With inventory at its lowest level since May, members of Northwest Multiple Listing Service report “stiff competition for move-in ready homes” in some neighborhoods. Other key indicators in the latest statistical report from Northwest Multiple Listing Service show upticks in sales and some leveling off on prices.

Pending sales for the Northwest MLS service area, which encompasses 21 counties, are up more than 20 percent from a year ago. Following typical August-to-September patterns, the volume of pending sales (mutually accepted offers) tapered off last month (down 9.6 percent) compared to the previous month.

Brokers reported 4,988 closed sales during September, beating the year-ago volume by 991 transactions for a gain of almost 25 percent. The number of completed transactions in the four-county Puget Sound region (King, Pierce, Snohomish and Kitsap) jumped 32 percent from twelve months ago.

Northwest MLS members added 7,923 new listings to the database last month, the fewest since February. At month end, with those additions, there were 35,254 active listings in the MLS service area, almost 6,900 fewer than a year ago (a decline of 16.4 percent).

“This market is proving to be challenging, but not for the reasons you might think,” said OB Jacobi, president of Windermere Real Estate Co. He pointed out interest rates are low, affordability is high, and confidence in the housing market is improving. “These are all good things, but the result is an influx of motivated buyers in a market where inventory levels have not yet caught up to the demand.” Jacobi, a member of the Northwest MLS board of directors, said one consequence is “stiff competition for move-in ready homes that are priced right, especially in neighborhoods close to Seattle.”

“In Central Puget Sound, 90 percent of sales activity is taking place in the more affordable and mid-price ranges, where the inventory level of homes for sale is low to healthy,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “Historical low interest rates combined with lower adjusted prices are attracting home buyers and investors at a healthy sales activity level,” he observed.

The median price on last month’s closed sales of single family homes and condominiums (combined) was $233,945, down about 9 percent from September 2010. Compared to six months ago (March 2011), prices area-wide have declined 3.7 percent, while a comparison to three months ago (June 2011) shows a price dip of 2.9 percent.

Distressed homes selling at deep discounts account for much of the drag on prices, according to data from the National Association of Realtors®. Its statistics show distressed homes – foreclosures and short sales – accounted for 31 percent of sales nationwide in August, the latest period in the NAR analysis.

Locally, industry veterans are encouraged by the combination of shrinking inventory and year-over-year gains in sales.

“Historically, low inventory at these levels has led to stable or slight increases in home valuations,” said Northwest MLS director Joe Spencer, COO and president of John L. Scott Real Estate. “It’s too early to tell,” he added, “because there are a lot of crosscurrents in the economy, but it’s encouraging seeing positive trends in sales activity and listing inventory.”

Realistic pricing is paramount in today’s market, according to Northwest MLS brokers.

“Historically low interest rates may get more buyers shopping but buyers are very well educated,” reported NWMLS director Darin Stenvers. “Before they ever leave their homes they have a good idea of which homes are priced correctly,” he explained. Conversely, he added, “Many sellers are not taking into consideration the effects of extremely tight appraisal guidelines and heightened credit requirements.”

Stenvers, the managing broker at John L. Scott’s Bellingham office, said homes are selling if sellers will look at the comparable sales that brokers and appraisers need to use as guidelines when bringing a home to the market. Many unrealistic sellers still think they can get what they “need” or “what they have invested,” but the buyers simply will not overpay, he emphasized. “Properly priced homes are selling, overpriced homes are not, it is that simple,” he stated, suggesting if a frustrated seller is not getting showings or offers they should ask their broker for new “comparable solds” and adjust their listing price.

Jacobi reported seeing an influx of cash buyers in the $800,000 to $1.2 million price range, especially on the Eastside areas around Bellevue. “Although prices have declined from their peak in 2007, financing for jumbo loans remains tough, so cash buyers have the upper hand in negotiating the best deals,” he observed. “The buyers are not looking at housing as a red hot investment,” he said, “but rather as a place for long-term value and a possible hedge against inflation. Like many of us, they’ve experienced first-hand the effects of falling stock prices and rising inflation. But unlike equity investments, these buyers figure that at least they can live in their home while they wait for the global economy to figure itself out.”

Commenting on the national picture, NAR Chief Economist Lawrence Yun said the market is underperforming given a pent-up demand in household formation. “We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said, suggesting buyers may be able to find more favorable credit terms with community and small regional banks.

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 22,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.

Statistical Summary by Counties: Market Activity Summary - September 2011

Single Family Homes + Condos	LISTINGS		PENDING SALES	CLOSED SALES
	New Listings	Total Active	# Pending Sales	# Closings	Avg. Price	Median Price
King	3,091	10,382	2,718	1,999	$392,444	$310,000
Snohomish	1,229	4,308	1,161	837	$250,980	$228,400
Pierce	1,268	5,167	1,100	806	$209,171	$191,750
Kitsap	355	1,792	320	207	$261,937	$230,000
Mason	91	866	88	63	$163,112	$125,000
Skagit	174	1,089	138	101	$254,444	$210,000
Grays Harbor	121	867	96	61	$137,938	$127,510
Lewis	114	774	74	56	$159,846	$149,522
Cowlitz	81	575	76	60	$154,044	$145,000
Grant	68	615	66	31	$155,935	$145,000
Thurston	398	1,744	314	246	$231,682	$219,950
San Juan	28	507	17	14	$431,743	$349,500
Island	149	1,045	116	103	$311,317	$247,000
Kittitas	82	594	65	34	$184,412	$178,750
Jefferson	61	618	48	21	$311,961	$325,000
Okanogan	38	471	19	20	$182,265	$164,500
Whatcom	308	1,767	266	209	$256,842	$225,000
Clark	47	258	56	19	$203,916	$179,900
Pacific	32	447	30	25	$142,334	$102,650
Ferry	8	62	1	0	0	$0
Clallam	56	489	49	32	$181,318	$150,000
Others	124	817	79	44	$216,009	$186,500
MLS TOTAL	7,923	35,254	6,897	4,988	$295,266	$233,945

Copyright © Northwest Multiple Listing Service
ALL RIGHTS RESERVED
This material may not be copied, published, broadcast, rewritten or redistributed without prior permission.

KIRKLAND, WA, September 6, 2011. August now ranks as this year’s best month for both pending and closed sales around Washington state, according to the latest report from Northwest Multiple Listing Service. Last month’s volume of pending sales was the highest number of mutually accepted offers since April 2010 when the homebuyer tax incentive expired.

Northwest MLS brokers reported 7,632 pending sales during August, a gain of more than 26 percent from the same month a year ago when they notched 6,037 pending sales. Last month’s total for the 21 counties in the MLS service area surpassed July by 450 transactions.

Thirteen counties had double-digit gains from a year ago, led by Snohomish County where pending sales jumped more than 46 percent.

“For the first time in a long time, I can say with confidence that things feel better,” said Northwest MLS director OB Jacobi, president of Windermere Real Estate. “We shouldn’t get too distracted by the large increase in pending sales,” he cautioned, noting, “It’s a positive sign, but these figures are being compared to last summer’s post-tax incentive doldrums. With that being said, we’re excited about the positive momentum in the market.”

“Interestingly enough,” Jacobi remarked, “We’re seeing the most activity in the $600,000 to $800,000 price ranges in King County, but low inventory continues to be an issue across the board.” He also noted the company’s mortgage reps are reporting a 50 percent increase in non-refinance loan applications, which he believes “is a positive indicator of things to come.”

Closed sales during August climbed more than 35 percent from the same month a year ago, rising from 4,211 sales to 5,704. Through eight months, this year’s completed transactions have outgained last year by 592 sales (36,918 versus 36,326, for an increase of more than 1.6 percent).

Northwest MLS members added 9,128 new listings to inventory last month, the fewest since February. With those additions, the selection at month end included 36,907 active listings, with about 86 percent of the inventory being single family homes.

Inventory has dropped more than 16 percent compared to a year ago (36,907 active listings at end of August versus 44,186 for same month a year ago).

“With a low level of home inventory for sale and historically low interest rates, we are seeing a healthy volume of sales activity causing multiple offers,” observed J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.

Multiple offers are occurring below the one million dollar mark close to job centers in Seattle and Bellevue, and below the mid-price point elsewhere, according to Scott, who advised would-be buyers and sellers to get “buyer ready.”

To get ”buyer ready,” Scott said potential purchasers “should get pre-approved for a home loan, understand the inventory level in your selected market area and price range, and sign up to receive daily email notifications of just-listed properties.” Sellers should take similar steps, he suggested: “If you have a home to sell, start investigating the process.”

Selling prices are still below year-ago levels. Area-wide, the median price for last month’s completed sales was $236,000, about 12.4 percent less than twelve months ago. Year-to-date through August, prices for sales of single family homes and condominiums (combined) are down about 9.4 percent.

In King County, last month’s median selling price was $315,000, down nearly 9.9 percent from a year ago. A year-to-date price comparison shows a decline of just under 8.4 percent.

Five counties show slight year-to-date price changes: Kitsap (-2.1%); Grant (-1.85%); San Juan (+2.6%); Okanogan (unchanged); and Whatcom (-0.65%).

Commenting on the latest numbers, NWMLS director Frank Wilson emphasized, “A real estate market is about activity and momentum.” He also noted historic affordability, with the cost of a home better matching income levels and extremely low interest rates contributing to favorable conditions. “We continue to live in a real estate market of extreme affordability, affordability levels that have not been seen in decades,” he stated.

Wilson, the branch managing broker at John L. Scott Real Estate in Poulsbo, noted Kitsap County is seeing slightly more new listings come on the market than a year ago, but total inventory is down about 6.6 percent.

“From a marketing prospective there is nothing better than motivated sellers who are willing to stage their home for sale and price it to be competitive in today’s market,” Wilson stated. “This market is now about serious buyers and serious sellers -- people who have a plan and goals in mind,” he observed, adding, “Our pending sales are up more than 15 percent which shows the activity of a healthy market.” He also noted a more balanced market, based on months supply (currently about 5.8 months supply compared to the year-ago figure of 7.1 months). However, he acknowledged, home prices continue to settle as they have dropped about 12 percent in Kitsap County compared to a year ago.

The National Association of Realtors® attributes much of the price drops around the country to sales of distressed homes, which are usually sold at deep discounts. NAR’s analysis shows 29 percent of sales nationwide are classified as distressed.

NAR officials also fault banks for “unnecessarily restrictive practices.” Such practices are restraining the housing recovery by denying loans to many creditworthy potential buyers, according to NAR. “Those declined buyers represent the difference between an uneven recovery, and a much more robust housing market that could stimulate the economy and create jobs,” the association declared.

Commenting on the Realtors’ most recent statistics, NAR Chief Economist Lawrence Yun described sales activity as underperforming. “The underlying factors for improving sales are developing, such as rising rents, record high affordability conditions and investors buying real estate as a future inflation hedge. It is now a question of lending standards and consumers having the necessary confidence to enter the market.”

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 22,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.

Statistical Summary by Counties: Market Activity Summary - August 2011

Single Family Homes + Condos	LISTINGS		PENDING SALES	CLOSED SALES
	New Listings	Total Active	# Pending Sales	# Closings	Avg. Price	Median Price
King	3,219	10,771	2,996	2,256	$396,533	$315,000
Snohomish	1,364	4,425	1,325	916	$255,925	$232,000
Pierce	1,409	5,283	1,290	952	$216,006	$186,750
Kitsap	455	1,925	333	270	$269,111	$235,000
Mason	175	949	83	55	$164,619	$141,000
Skagit	233	1,134	138	112	$235,977	$205,250
Grays Harbor	166	957	101	66	$136,859	$135,350
Lewis	124	824	89	60	$156,015	$134,750
Cowlitz	130	610	95	81	$147,892	$135,500
Grant	123	675	59	53	$170,485	$159,000
Thurston	482	1,813	370	240	$238,464	$225,500
San Juan	40	528	19	12	$458,000	$295,000
Island	182	1,132	120	107	$311,889	$268,000
Kittitas	97	621	48	57	$204,919	$172,000
Jefferson	79	652	36	24	$268,301	$239,000
Okanogan	69	495	17	19	$185,484	$168,000
Whatcom	414	1,915	296	250	$263,994	$234,750
Clark	62	281	55	52	$210,632	$177,500
Pacific	66	490	35	23	$129,003	$95,000
Ferry	5	61	4	2	$277,000	$277,000
Clallam	73	518	42	36	$219,735	$186,000
Others	161	848	81	61	$208,829	$179,000
MLS TOTAL	9,128	36,907	7,632	5,704	$298,222	$236,000

Copyright © Northwest Multiple Listing Service
ALL RIGHTS RESERVED

 J. Paul Getty famously said, “Buy when everyone else is selling and hold when everyone else is buying.” Many commercial brokers believe that present market conditions provide an unprecedented buying opportunity to lock in significant real estate investment returns. Despite the opinion of some real estate professionals, however, many investors remain on the fence. While each investor must carefully consider their own financial objectives and risk tolerance before jumping back into the market, we’ve listed a few reasons investors should consider in assessing today’s real estate purchase opportunities:

1. 1031 Exchange Opportunity - Investors with low basis properties may utilize Internal Revenue Code §1031 to defer tax on the sale of one underperforming asset to acquire one or more discounted replacement properties that may enhance cash flow and provide higher long term investment returns.
2. Attractive Purchase Prices - Many distressed sellers (and some banks) are selling investment properties at deep discounts and accepting offers that are below current replacement costs. Recent reports indicate that lenders are selling foreclosed properties (often referred to as ‘real estate owned’ or “REO” property) at an average discount of 28% below prices being paid for comparable non-distressed properties in the same market.
3. Historically Low Financing Costs - The Fed’s stimulus efforts, such as QE2 (“Quantitative Easing 2”), have resulted in historically low interest rates, making the cost of debt service exceptionally attractive. Qualified real estate investors can take advantage of today’s low interest rates to bolster cash flow and lock in better long-term investment returns.
4. Inflation Hedge - With many economists predicting that inflation will increase at some point in the future, hard assets, like investment real estate, can provide a hedge against the declining value of money in an inflationary environment. Additionally, ownership of leased real estate can provide an investor with increased income as rent rates also tend to rise in inflationary periods.
5. Yield - Financial institutions are paying very low yields on money market accounts and other conservative investments. In contrast, many investment properties are generating returns in the 7-9% range, providing considerably better yields than many other competing investments.
6. Less Competition - Foreign ownership of U.S. investment real estate is increasing. Foreign investors see U.S. real estate as a solid investment in a stable economy, and the lower value of the dollar has made U.S. real estate an even more attractive bargain. These two trends will increase demand, which will drive up prices on certain types of investment property. By buying now, investors can stay ahead of the competition.
7. Desirable Product Classes - Some classes of investment property are experiencing considerably more demand than supply. For example, in the multi-family segment, demand for rentals has increased as foreclosures have mounted and there is little new multi-family construction in the pipeline to meet such increased demand. As a result, multi-family rents are increasing and many experts project this trend to accelerate.
8. Worst Price Declines are Over - Property values nationally have declined by 30% or more since the market peak in 2006. Many economists believe we are at an important pivot point where prices will stabilize and begin to increase (albeit at lower appreciation rates than in the past). If investors wait too long, they may find they are facing competing bids and higher prices to close. Buying before demand picks up in the nearly inevitable recovery locks in today’s bargain prices.
9. Real Estate is Local - Despite national statistics about real estate prices, most investors are aware that real estate is local and supply/demand and investment returns are determined by local market conditions. Many investors are using 1031 exchanges to exchange out of areas that are not projected to perform well and into areas where the local economy is more robust and investment returns are more favorable.

Financial professionals tell their customers it is almost impossible to"‘time the market" and purchase investments at the very lowest point and later sell these same assets at near market peaks. The concept is fraught with many problems and, as a result, most financial advisors caution customers to not pursue this approach. Despite this advice, investors often wait until it’s too late to purchase and miss opportunities. Don't be left out.

Cris Anderson, Esq., Northwest Division Manager,Asset Preservation, Inc.
77.909.1031 Direct; 800.282.1031 Corporate; cris@apiexchange.com ;www.apiexchange.com

This information is not intended to replace qualified legal and/or tax advisors. Every taxpayer should review their specific transaction with their own legal and/or tax counsel. ©2011 Asset Preservation, Inc. All rights reserved.

What’s the top place in the U.S. to buy a home over the next two years? That would be Tacoma, Wash., according to financial-data firm Fiserv.

Despite the gloomy picture for the national economy and housing market, residents of that city, on Washington’s Puget Sound, are in for a 25% increase in home prices by spring 2013, according to a report released Tuesday by Fiserv Inc. Another strong market is expected to be the Palm Bay and Melbourne area on Florida’s eastern coast (up 18%). Gains of about 10% are expected in Seattle, Tucson, Ariz. and Memphis.

David Stiff, Fiserv’s chief economist, says cities like Tacoma and Seattle have strong, diverse economies and should fare well over the next two years. Areas like Palm Bay-Melbourne, Tucson and Memphis were hammered by price declines but now are seeing strong interest from investors, Mr. Stiff notes.

Fiserv, which published the report along with Moody’s Analytics, also compiled a list of poor performers.

That list is mostly a familiar one — areas that still face a glut of foreclosures and were reliant on single family and condominium construction to fuel their economies. Those include Miami (-22%), Las Vegas (-19%), Fort Lauderdale, Fla. (-19%) and Phoenix (-15%).

The fifth one — the suburban Bethesda, Rockville and Frederick areas of Maryland — is a bit more perplexing. Fiserv expects that area’s prices to fall by 13%.

The Washington, D.C., area and its suburbs have held up relatively well during the housing bust, mainly to due to low unemployment levels because of the strong base of federal jobs and government contractors. However, Mr. Stiff sees potential weakness, noting that home prices in D.C.’s northwestern suburbs have risen far higher than the area’s household incomes over the past decade.

Fiserv forecasts U.S. home prices will finally start to turn around by early next year. It forecasts home prices in 384 U.S. metro areas will rise by an average of 2.7% between the first quarter of 2012 and the first quarter of 2013, with 95% of those metro areas showing gains in that time period.

This month’s stock market declines, the battle over the federal debt ceiling and the European debt crisis have deepened Americans’ pessimism and may dent home sales. But Mr. Stiff notes that home prices are far more affordable now that the housing bubble has burst.

In most metro areas, home prices —when compared to household incomes — are at pre-bubble levels. In addition, the inventory of unsold homes and the number of new foreclosures is finally shrinking.

“The amount of foreclosure inventory hitting each market is going to slowly decline this year and start to be less of an impediment to price appreciation,” Mr. Stiff says.

KIRKLAND, WA, July 6, 2011. Continuing the double-digit gain in home sales during May, last month's pending sales surpassed the volume for June 2010 by nearly 36 percent. Northwest Multiple Listing Service members reported 7,539 mutually accepted offers last month, up nearly 2,000 transactions from the year-ago total of 5,547 pending sales of single family homes and condominiums. 

At midyear, Northwest MLS brokers have logged 41,151 pending sales for a slight improvement on the total of 41,001 for the first six months of 2010 when sales were stimulated by a federal tax incentive. 

Closed sales for the 21 counties in the Northwest MLS service area are running slightly behind 2010 figures. Through June, members have completed 26,034 sales, which compares to a total of 27,624 closings for the midpoint of 2010. 

MLS members reported 5,561 closed sales during June, down 3.5 percent from the same month a year ago when there were 5,763 closings. Five counties (Clark, Cowlitz, Jefferson, King and Mason) reported year-over-year increases in the number of closed sales.

   *PLEASE NOTE: Northwest MLS reports both pending sales (mutually accepted offers) as a barometer of the most recent activity, and closed sales (completed transactions). 

"It feels like we have hit the bottom of the market," remarked Lennox Scott, chairman and CEO of John L. Scott Real Estate. He described sales activity as being at "healthy levels" for the past seven months across all price ranges close to the Seattle-Bellevue job centers and up through the median price range in the surrounding markets. "Buyer confidence has definitely returned," he proclaimed. 

Echoing that comment, Matt Deasy, the general manager of Windermere Real Estate East, noted the early signs of a market shift, which he expects will prompt shifts in buyers' priorities. "The combination of lower inventory levels and higher sales is leading to early signs of a market shift," he observed, adding, "These conditions are also causing the median home price to stabilize, despite being lower than last year." 

Deasy, who is also a member of the Northwest MLS board of directors, said brokers are "seeing a lot of activity in the markets close to the job centers in Seattle and Bellevue which is causing some buyers to miss out on opportunities if they don't act fast enough." As this cycle continues, he expects buyers' priorities will shift from looking for the best deal possible to finding the best house for their needs at a fair price. 

Prices on last month's closed sales area-wide were down about 9 percent from the same month a year ago, but compared to January, the drop is only about 2.8 percent. The median price for sales that closed last month was $240,950; a year ago it was $265,000. In January it was $250,000.

CoreLogic, Inc., a California company that analyzes various statistical data, attributes much of the drops in home prices to distressed sales. In a report issued last week, the company said year-over-year prices for sales during May fell 5.8 percent in the Seattle area and 7.4 percent nationwide. If homes in or under threat of foreclosure are excluded, the drops were just 1.75 percent in King and Snohomish counties, according to CoreLogic's analysis.

Like prices, inventory is showing signs of stabilizing. Northwest MLS members added 10,334 new listings to inventory last month, about the same number as a year ago when they added 10,354 new listings. With those additions, there were 36,871 single family homes and condominiums offered for sale in the MLS database at the end of June. That's down about 14 percent from a year ago when inventory stood at 42,940 active listings.

Measured by "month's supply," there is about a 5-month supply of homes system-wide, which is considered to be a balanced (or neutral) market favoring neither buyers nor sellers. Inventory is tighter in King County where the month's supply is about 3.7 months.

"For the most part, Kitsap County is seeing a normalization of our market in the price ranges below $350,000," said Frank Wilson, branch managing broker at John L. Scott Real Estate in Poulsbo. "We are seeing inventory levels in the 4-to-6 month timeline," he reported, while noting it's much higher at the upper end of the price spectrum. The MLS map areas encompassing East Bremerton and Silverdale are experiencing good activity said Wilson, a member of the Northwest MLS board of directors. 

With the return of buyer confidence, Scott said multiple offers are occurring in markets where there is low inventory. "Buyers are seeing the advantage of historic low interest rates, lower adjusted prices and low down payment options," he stated.

Commenting on the current market, Wilson emphasized the "basics have not changed" for buyers and sellers, "even though it is easy to get caught up in the national news. Real estate is a micro discussion, not a macro one," he emphasized. "Your broker should be able to talk neighborhood specifics and what the inventory and turnover are within each area," he added. 

Northwest MLS director Meribeth Hutchings reported "the buyers are out there," and noted they're looking for an "opportunity." She also said they are seeing multiple offers, but added no uptick in prices is expected. "Where I am seeing increased activity is with our property management company, which reports vacancy rates of only 3-to-4 percent," said Hutchings, the designated broker/owner at Windermere Real Estate/Lake Stevens Inc. 

"Buyers need to talk with a lender first to better understand their mortgage options, become informed about today's market and be prepared to make a reasonable offer when they find a home that meets their needs," Wilson advises. Sellers need to be priced within about 3 percent of what the home will sell for, and they need to look at their home and property through the eyes of a buyer. "Paint, clean, de-clutter and above all, be prepared to move," he suggests. 

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 22,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.

Statistical Summary by Counties: Market Activity Summary - June 2011

Single Family Homes + Condos	LISTINGS		PENDING SALES	CLOSED SALES
	New Listings	Total Active	# Pending Sales	# Closings	Avg. Price	Median Price
King	3948	11173	3008	2362	$412,836	$317,000
Snohomish	1466	4548	1279	866	$264,163	$239,925
Pierce	1509	5501	1266	872	$209,078	$195,278
Kitsap	472	1834	315	248	$277,923	$238,000
Mason	176	897	75	59	$179,264	$145,000
Skagit	220	1113	147	91	$234,474	$185,000
Grays Harbor	179	925	107	60	$129,263	$113,500
Lewis	157	780	76	40	$153,950	$145,500
Cowlitz	149	602	100	97	$149,225	$140,000
Grant	124	630	65	60	$164,518	$154,000
Thurston	480	1746	360	290	$236,378	$228,475
San Juan	57	499	12	9	$462,889	$415,000
Island	240	1062	116	67	$268,964	$245,000
Kittitas	120	579	60	31	$227,551	$190,000
Jefferson	109	613	40	28	$244,505	$247,500
Okanogan	79	450	27	17	$206,200	$157,500
Whatcom	431	1864	291	215	$287,558	$247,450
Clark	59	285	48	42	$184,051	$178,450
Pacific	81	463	27	20	$123,650	$101,546
Ferry	9	63	0	1	$55,000	$55,000
Clallam	101	483	43	31	$222,412	$194,900
Others	168	761	77	55	$209,613	$185,000
MLS TOTAL	10,334	36,871	7,539	5,561	$310,007	$240,950

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Seattle is the best place to buy a home right now.

Researchers Eli Beracha and Ken Johnson made that conclusion after analyzing data for 23 different Metropolitan Statistical Areas (MSAs).

The study used an eight-year holding period for comparative purposes and factored in costs associated with homeownership, tax benefits and home price appreciation, and considered returns on similar risk portfolios. The net result is that home price gains would need to average only 3.25% annually to beat renting, according to Beracha and Johnson.

After crunching the numbers, Beracha and Johnson concluded buying a home may beat renting for the first time in several years.

Two key factors prompted their conclusion. First, rents are expected to rise, perhaps as much as 7 percent in each of the next two years. Second, home prices have dropped enough -- about 32 percent from their 2006 peak – to create a buying opportunity.

In corroborating the analysis, CNNMoney compared 10 metro areas and determined it makes sense to buy in half of them: Cincinnati, Chicago, Milwaukee, Pittsburg and Seattle. In the other five cities, Boston, Dallas, Honolulu, Houston, and New York, it is more advantageous to rent. (See chart.)

Authors of the CNNMoney analysis noted Seattle's home prices have grown quickly over past 25 years, but since the late stages of the boom during the 2000s, "prices have fallen 26% from its peak, according to Fiserv, making purchases more attractive." Research shows by early 2011, prices had fallen to about 26 times the annual rents.

"Seattle's price rises have been robust historically and for someone looking for a home today, gains would only have to near the metro area's normal growth rate for buyers to come out richer than renters in eight years," stated the CNNMoney report.

Of the 23 cities Beracha and Johnson looked at, Seattle is the best place to buy right now. When renters invest in portfolios that include stocks, the appreciation rate required over the next eight years there is 4.84 percent and the area's historical average is 6.06 percent.

In comparing the cost of owning with the cost of renting over three decades, Beracha and Johnson said renting has usually come out ahead. Buying typically leads to higher monthly and annual bills once all costs are factored in – mortgage payments, property taxes, maintenance and transactional costs, they noted.

Those higher costs can be offset if the home gains in value. But if renters invest the savings, as the researchers assumed, renting has typically been the better deal. "I was shocked at how often renters won," said Johnson.

Even in cities where people are, theoretically, better off renting, they may not be in reality. Paying off a mortgage is a forced savings plan, said Dean Baker, co-director of the Center for Economic and Policy Research. The mortgage bill comes in every month, the homeowner pays it and the mortgage balance goes down, he explained.

In comparing renting with buying, Baker issued caveats: Buyers should beware the assumption that home prices will rebound, even from current depressed levels, Renters, meanwhile, are just as likely to spend their savings, he suggested, adding, "They'll wind up with less money than homeowners."

In discussing their findings, Johnson said, "Our study disputes the commonly-accepted wisdom in the United States that renting is always throwing away money. As a government and a society, we recognize that home ownership has multi-dimensional benefits: increasing civic pride, improving self-esteem, crime prevention, child development, and better educational outcomes, among others. Yet our findings show that financially, if renters exercise disciplined investing over time, they can be more successful in accumulating wealth than those who own a home."

At the same time, Beracha said, "the study reinforced previous research that found home ownership to be a better option for individuals who might otherwise spend the difference between the costs of renting and owning."

"People who own typically wind up with more value, because a home appears to be a forced savings account," Beracha said. For financial value to emerge in a rental situation, "the key question is whether individuals have the discipline to invest the cash savings they'd have from renting their home rather than buying it – a pattern that's not typical of American renters."

Ken Johnson is an associate professor, Knight-Ridder Research Fellow, and editor of the Journal of Real Estate Practice and Education at Florida International University. Eli Beracha is assistant professor, department of finance, at East Carolina University's College of Business. Their "buy vs. rent" report will be published in an upcoming issue of Real Estate Economics, the official journal of the American Real Estate and Urban Economics Association.

Copyright © 2011, Northwest Multiple Listing Service. All rights reserved.

 

Few can deny a lot about the real estate business has changed. "What hasn't changed is that, at the end of the day, this is still a relationship business."

Ron Phipps, 2011 president of the National Association of Realtors and a third-generation real estate professional, made that comment during an interview with Maria Patterson, executive editor at RISMedia.

"The availability of information has changed, the way we finance has changed, the way we negotiate, the way we broker, and the way we market," are among changing aspects of the business Phipps cited.

Phipps said technology has made him more efficient and able to do more work, but he believes his role is similar to what it was 30 years ago in that people need him to look at the data, analyze it and give them great advice. "The challenges of the last five or six years really demonstrate how important our advice is and that speaks volumes."

Asked to identify priorities as he assumes the helm, Phipps, the principal broker at Phipps Realty in Warwick, R.I., listed the availability of mortgage credit as the most pressing challenge. "We cannot get buyers into homes until funds for lending open up," he stated.

"NAR believes that everyone who wants to own a home and is able to afford one should be able to do so, Phipps emphasized. There's a reason homeownership is called the American Dream, he continued. "It benefits individuals and families, strengthens our communities, and is integral to our nation's economy."

With signs of a stabilizing market, Phipps said the real challenge is making sure there's a common sense, efficient mortgage approval in place, a theme he repeated in remarks at the 2010 REALTORS® Conference and Expo.

"As we make progress toward real estate and economic recovery, Realtors are focused on making sure that homeownership is both attainable and sustainable," but added, "However, we know that the old way of doing things just won't work. We need a new model for both government and the private market."

With the annual conference coinciding with revelations about improper foreclosure procedures that are creating confusion and uncertainty in the market, Phipps emphasized the importance of addressing this serious problem. "Homeowners must be reassured that, if they are facing foreclosure, the review process will be accurate and timely. Home buyers and investors must have confidence that the seller of any property is able to convey clear title. We urge lenders to assess the situation and correct any problems they identify, as soon as possible, to restore confidence in the system."

Phipps said NAR is actively engaged in helping keep more owners in their homes, but when this is not possible, Realtors encourage a streamlined short sale process to help families avoid foreclosure. Toward this end, he said NAR has met with officials of top banks over the past few months to urge banking leaders to improve their loan modification and short sale processes.

As he embarks on what he describes as "ambitious and powerful goals" for 2011, Phipps said what speaks most directly to people is the notion of homeownership. "I take exception to those who say homeownership is not and should not be the American Dream. If we are effective as an organization, then we will embrace our code of ethics with the concept that sustainable homeownership is good for everyone. We should not let the mistakes of five years ago change the tradition. While Thomas Jefferson talked about life, liberty and the pursuit of happiness, in Britain, they talk about life, liberty and property. I want to acknowledge that the pursuit of happiness includes homeownership."

Phipps said his most important goal is that "we, as an organization, persuasively articulate the value of homeownership for all citizens, all families and all people. At the end of the day, we are involved in the shelter business and owning your shelter is still better than renting it."


NWREporter January 2011