Kenmore Undressed

Delusion Comes in Many Forms: Facing Facts Can Be Difficult

I spoke with the Broker of a fairly large real estate brokerage the other day. She is one of those consumate optimists (don’t you just hate those people?), but even she has been shaken by the current real estate market. “The phones aren’t ringing,” she said. “It’s awfully quite out there. I’m worried.” 

The truth is, she should be worried. The deteriorating economy and upcoming election have had a chilling effect on home sales both here and nationwide. It has been rough for sellers and their agents. Buyers are also facing difficult lending challenges. What amazes me is that a lot of people out there have not come to terms with reality. Here are two perfect examples:

NUMBER 1: THE REALTOR WITHOUT A CLUE

I’m a contributor to a Real Estate Blog called Active Rain. Over 100,000 agents write blog posts on this site. Yesterday, I read a particularly interesting blog by an agent who was asking if she should take a listing knowing full-well that the seller was unrealistic about the price (way too high) and the seller didn’t even want a sign on the property. She rationalized that they might get lucky and sell the home (even though the home has been previously listed ), or that her virtual tour would attract the right buyer or this listing might generate residual business for her because “she’ll do a great job!”  The fun part was reading almost 70 comments telling her that it’s ridiculous to take an overpriced listing (no matter what the market conditions are). From her response to the comments, I have a strong sense that she’s going to take the listing knowing full-well that she is not doing her clients any favors. This is why our industry has earned such a bad reputation and why this downturn may very well be a good thing. It’s going to eliminate the non-professionals……but:

2) HOMEOWNERS ARE DELUDING THEMSELVES AS WELL

Zillow, one of the most popular Internet home value sites published some interesting findings regarding home owner expectations in the current market. Zillow indicated in their Homeowner Confidence Survey that there exists a perception-reality gap. Quote: “Despite the turbulent quarter, half of U.S homeowners do not think their home’s value has decreased. In reality, nearly three-quarters of homes lost value in the past 12 months.”

The bottom line is that we all need to step back and take a cold, hard look at reality. I recognize that every home transaction is unique but we all need to be guided by the core values of honesty, fair-play and professionalism in order to protect our clients.

Yesterday the Fed Lowers Interest Rates, Today 30-Year Mortgages are More Expensive

Yesterday I wrote a brief piece on the .5% interest rate cut by the Federal Reserve in the hopes of explaining how this impacts us regular folks. As I was writing the piece one of my colleagues looked over my shoulder and said, “You know, it seems that every time the Fed lowers interest rates for the banks, the interest rates on mortgages bump up. Why is that?” Well, in theory, there should be, over a period of time, a lowering of interest rates on consumer loans as a result of the Fed’s actions, but today mortgage giant Freddie Mac reported that 30-year, fixed-rate mortgages averaged 6.46 percent this week, up from 6.04 percent last week. The sharp increase pushed 30-year rates to the highest level since the week of Oct. 16.

Today, the Seattle Times offers an excellent article explaining why this happened:

“Analysts attributed the increase to the impact the financial crisis is having on bond markets. The upheavals on Wall Street last month drove investors to the  safety of Treasury securities. Now that the panic is easing a bit, investors are moving out of Treasury bonds into other investments. That movement means less demand for Treasury securities, pushing their yields higher. That increase drives up rates for mortgages linked to those investments.”

Even though interest rates are still under 7% (which is historically low), this increase isn’t helping sell homes. Let’s hope that things settle down after the election.

The Central Bank Cuts the Federal Funds Rate: What does this mean?

The Federal Reserve again lowered a key interest rate by .5% to 1%. This interest rate is called the “federal funds rate” which is the interest banks charge each other on overnight loans. From an historical perspective, this rate has not been lower since 1958 and represents an aggressive move by the Fed to restore confidence in the market and stimulate banks to make loans.  

But here’s an important question: What impact does this interest rate cut have on the consumer’s mortgage rates, credit card interest or other loans? Does a reduction in this rate matter? Will home owners in Seattle, Kenmore or New York City be able to get a better rate on their mortgages? Well, the short answer is yes. In the long-term the theory is that lowering this interest rate exerts downward pressure on the whole economic system resulting in lower consumer interest rates.  I have a colleague who has a degree in economics to whom I posed this question. He confirmed that the overall strategy of the Fed lowering the rate is intended to stimulate lending. He said there’s a fancy economics term called the velocity of money that applies here. However, he believes the the Fed is lowering the rates because there is a total lack of confidence and trust between the large lending institutions. ”It’s really about psychology,” he said. My friend also said something I think is critical: “If a consumer has good credit and the right amount of cash, they can still buy a house even in the current economy!”

So what does this all mean? The Federal Reserve has a number of “tools” to help influence banks and stimulate lending. Today they sent a clear message that action is needed and they will be monitoring the results of the interest rate cut. Let’s see what happens.

A special note: I am not an economist.

A Schizophrenic Day: Home Prices Down, Stock Market Up, Confidence Way Down!

It was an amazingly confusing day today in the world of economics and real estate. The Seattle PI reported that Seattle-area house values continue to drop, falling 8.8% since last August. Nationally, the numbers are sobering: a 30.7% decline in Phoenix, 30.6% in Las Vegas, the LA, San Fransisco & San Diego markets down 25% and Miami & Tampa down 28.1 & 18.1% respectively.  

There were numerous reports of a huge decline in consumer confidence. Consumer Confidence is one of those economic indices that analysts watch carefully because the majority of our economy is driven by consumer spending. According to a report by marketwatch.com “the implosion of the housing bubble, the weak job market, the bailout of the banks, and the sell-off in the stock markets have put consumer in a sour mood.” This could a problem as we approach the Christmas shopping season. Already, many retailers are bracing for chilly sales.

Then, just when I was getting depressed, PricewaterhouseCoopers announced that among major metropolitan areas, Seattle’s real estate market is the best in the nation as a prospective investment.

THEN, the Stock Market closed up almost 900 points! Whew……….I am reminded of the old curse: May you live in interesting times!

Picture by MrJuggles

Mr. Freeze the Financial Curmudgeon: Getting Spanked by “The Invisible Hand”

I, MR. FREEZE, AM REALLY P…….ED OFF! I HATE BEING LIED TO. I HATE PROPAGANDA. I HATE LIARS, THIEVES, AND HALF-TRUTHS. MR. FREEZE IS SICK AND TIRED OF LISTENING TO THE “VIRTUES” OF THE FREE MARKET AND HOW IT WILL “REGULATE ITSELF”…….WOULD THE WEALTHY FINANCIAL CLASS QUIT SAYING THIS? IT JUST ISN’T TRUE. MR. FREEZE SAYS SHUT UP. MR. FREEZE HATES BEING SPANKED BY THE INVISIBLE HAND.Until now, I, Mr. Freeze the Financial Curmudgeon have been silent on the the Financial/Credit Crisis, a crisis that has literally gripped the world economy by the throat. It threatens our way of life. It has destroyed our credibility in world markets and our confidence in our own institutions. It has tanked the real estate market. It has made our retirement nest eggs dwindle to the size of apple seeds. What makes Mr. Freeze more angry than anything is the fact that  NO ONE WANTS TO HEAR THE TRUTH: Unregulated American Capitalism has failed! Those of you who believe that the free market can do no wrong need only look at your dwindling wealth, your childrens’ shrinking college fund and the number of zeros in the $700 Billion rich man’s bailout (oh….I’m sorry, rescue!). 

The High Priest of Capitalism himself, Alan Greenspan, admitted as much before Congress this week. Swallowing his pseudo-naive Libertarian pride, the exchange went like this:

Congressman Henry Waxman asked: “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

Mr. Greenspan: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

Mr. Greenspan, who was without a doubt the most powerful man in the world said the following:”Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity — myself especially are in a state of shocked disbelief.”

ARE YOU KIDDING ME? I’m not buying it. For the last 30 years the wealthy special interests who run this country have convinced “Joe the Plumber” (AKA Mr. I-never-paid-attention-in-class) that government was the problem and that if business made more money with fewer taxes and no regulations, wealth would trickle down to the “little people.” Life would be grand. Well, my friends, Mr. Freeze has more bad news: wealth has been spread around (redistributed), but not how you think:

“The mega-rich of today are as wealthy as any Americans have been at any time in our history, arguably richer. In 2004, a household in the top 1 percent of incomes pulled in an annual average of $940,000. That’s just the rich. If you wanted to be among the mega-rich (the top tenth of that 1 percent) in 2004, you had to earn an average of $4.5 million. to be filthy rich, a true Midas in the top one-hundredth of the top 1 percent, you needed $20 million a year. That’s $385,000 a week.”

“From 1990 to 2004, real income increased just 2 percent for Americans below the top 10 percent of earners. But in that same time, the real income increased 57 percent for the top 1 percent and 112 percent for the top 0.01 percent. To put it in wider perspective, economists Thomas Piketty and Emmanuel Saez found that the top 10 percent of earners in 2004 made 42.9 percent of everything that Americans earned. The top 1 percent alone gobbled up 16.2 percent of total income. The distribution of wealth and income has not been so out of whack since the 1920’s, if then.”  (p.222 Why We Hate Us by Dick Meyer) 

My friends, Mr. Freeze feels your pain. Mr. Freeze would like to make it all better, but Mr. Freeze knows that many of you can’t believe that it wasn’t government that was picking our pockets. No, no, no, it was the greed and corruption of investors and speculators and their influence over politicians. Ultimately, deregulation let the criminals do whatever they wanted. Before Mr. Freeze goes to bed tonight and cries himself to sleep, Mr. Freeze would like to share a video from tonight’s 60 Minutes that explains why unregulated human nature and the free market” are a deadly combination. Just click on the picture below.

Localism: Is It Just Another Pseudo-Trend or Is It For Real?

Yesterday, the Seattle Times featured an interesting article entitled:  “The New Localism: saving Main Street” in which the author and futurist, Joel Kotkin,  expresses the idea that the current financial chaos facing the United States may, in fact, be a catalyst in strengthening family ties and local communities. Mr. Kotkin points out that localism isn’t really a new phenomena, in fact, there has been a push for more localized markets and businesses for many years.  The difference today is that we have greater access to technologies that can help communities localize in more creative ways.

Since the early 70’s  books such as Future Shock and A Nation of Strangers and more recently Bill McKibben’s Deep Economy and Robert Putnam’s Bowling Alone have pointed out that America is “falling apart at the seams” due to the huge changes taking place in the world.  Kotkin suggests that we are seeing a reversal of this trend:

1) More Americans are staying closer to home. He writes that Americans born today are more likely to reside near their place of birth than in the 19th century. This is driven by an aging population and more limited economic opportunities.

2) Higher fuel prices are forcing Americans to spend less time traveling. It is also fueling a resurgence of local markets and local manufacturing. Simply put, transporting food and other products has become very expensive. Purchasing these things more locally makes sense.

3) Technology has allowed millions of Americans to work from home either as telecommuters or private businesses.

What fascinates me as a realtor is how “localism” has recently become a common notion in the real estate industry as well. A growing number of real estate agents  are writing blogs that focus on hyper-local markets such as their own town, neighborhood or social group.  This blog is a perfect example of a blog that focuses on my hometown.  I believe a local approach will ultimately provide better service to buyers and sellers. I also believe that agents who blog their own communities are more focused on their area of expertise and can rightly call themselves “neighborhood experts.”

To answer the question, is localism relevant, yes. Is it a pseudo-trend, I don’t think so.

Market picture by natalie maynor

The October Market in Kenmore Remains Lethargic: An Excellent Buyer’s Market

As we approach the end of October, I wanted to take a quick look at the numbers to see if sales have picked up. Here in Kenmore, things continue to be lethargic. One positive movement is a net loss in current active listings. We had over 200 last month. We now have 181:

What I’m about to write  should interest all of you potential buyers out there. Judging from the pending and sold properties, there has been immense downward pressure on prices.

• There are 33 pending sales at this time. These homes are PENDING at 92% of their original list price. On average they have been on the market for six months.
• 10 homes have sold in Kenmore since the beginning of October. These homes have sold at 93% of their original list price. Average days-on-market are are well over six months.

As we approach 2009 I would advise potential buyers to start planning with a qualified, thoughtful lender. Even though there’s a lot of uncertainty in the market, I believe buyers will have the advantage for many months to come.

Mt. Rainier over Lake Washington

Day Two Hundred and Eighty Four - Mt. Rainier over Lake Washington

Originally uploaded by Walkabout Wolf

We have had spectacular weather for the last several days in the Seattle area. It has been crisp, colorful and sunny. In fact, after having lived here for 22 years, this has been an Autumn to remember. One of the most incredible things about living in the Seattle area is Mt. Rainier which dominates the southern sky on a clear day. For those of you who haven’t visited Seattle, I thought this picture would give you a sense of how huge the mountain is. This pictures was taken from the I-90 floating bridge, which lies in the middle of Lake Washington. We have a similar view from Kenmore which is only a few miles north. You don’t have to live close to this natural treasure to feel its power and maginficance. The mountain reminds us that even though we live in a relatively large urban area, we are surrounded by some of the most wonderful natural beauty in the US.

Here are several other pictures of Mount Rainier taken recently by photographers. Hope you like them:

Pictures by  John_Bennett and marctonysmith .

Follow-up on the Town Hall Meeting: Budget Cuts Seriously Jeapordize Public Safety

I wanted to write a quick follow-up to my blog post from October 13th regarding the mounting King County budget cuts. As you may know a town hall meeting occured last night at the Shoreline Conference Center. According to today’s Seattle Times the cuts are going to run deep into vital services throughout the county. King Co. Sheriff, Sue Rahr, said cuts will be almost $9 million for the criminal-justice system. Approximately 79 employees will be laid-off (this includes 2 aminal-control dispatches, 2 gambling and vice detectives, a warrant detective and most drug-enforcement officers). For a more detailed description of the meeting click on this link: Officials: King County Budget cuts “seriosuly jeopardize” criminal-justice system. Even though the Times article suggested that the greatest impact of the cuts would be in unincorporated areas, this isn’t the best of news. 

Top Tools for Learning: How to Stay Ahead in an Age of Information

How are you dealing with all of the technological changes in your life? Let’s face it, iPods, computers, telecommunication technology and other tools have literally transformed our world. I don’t know about you in your career but as a Realtor (c) it’s incredibly important that I keep up with a MASSIVE amount of information. I must also adapt to new communication technology (phone and computer) and I need to distill all of this “stuff” into a coherent package (or toolkit) that I can use to be effective in my work as a real estate agent. This very blog is the result of a huge number of technologies working together. Trying to keep up is like drinking through a fire hose. It wasn’t so long ago that things were……..different:

I went to high school in the early and mid 1970’s….you know, we had disco and high inflation (or stagflation..I can never remember which), the unpopular Vietnam War was raging on and we had any number of other crises from OPEC’s gas embargo to to Richard Nixon’s plumber’s union. I sure some of you don’t remember that there was even a “Cold War” going on. Basically, humanity was wrestling with some fairly complicated issues. Looking back, it’s hard to believe our troops in Vietnam couldn’t just email family and friends, the President had to call the Soviets on the “red phone” if there was a dispute or missunderstanding. We barely had VCR’s and video games. Computers were rare. In fact, my high school had a couple of small computers that only the most dedicated math geniuses could fathom. When I look back on it, it’s as if we were moving through time in the dark. How anything got done is a miracle……….

On a more personal level, I grew up in a small town in Utah. I went to a medium-sized high school and all my friends and I dreamed about was graduating, going to college and getting a place of our own. We were products of a world in which technology and communications was, by today’s standards, paleolithic. Through it all, we did have a number of visionary thinkers that tried to tell us a new age was coming. One of the most well-know was Alvin Toffler. His seminal work was entitled “Future Shock.” Written in 1970, I remember our history and social science teachers showing us a short film based on his concepts. Basically, Toffler addressed, head-on some of the very issues modern technology has brought our way: the problems of dealing with change, the creation of a throw-away society, the breakdown of borders, advanced technological shifts, the creation of alternative lifestyles (a interesting concept at that time) and a whole lot more. In short, Toffler believed that all of this change was going to ultimately have powerful affects on humans and that the very volume and velocity of change was going to cause political, social and family challenges………………………….OH HOW RIGHT HE WAS. For those of you who haven’t read Future Shock, I think it’s worth your time to revisit this provocative book and think about how you’re dealing with all the change coming at us every day.

On a lighter note, a good friend of my sent me a link to an interesting and helpful website: Centre for Learning & Performance Technologies. The site includes a free list of the Top 100 Tools for Learning. It’s truly amazing to me that a mere 30 years ago none of these “tools” existed. Think about it: we didn’t have the Internet, high speed communication lines, “on-line social networks,” email, (no voice mail either), home computers, document scanning, cell phones, iPods,…..etc. I hope you check out the list as you may come across a few tools that can make life just a little bit easier.  Just click on the picture below to begin your journey. Have fun.

Technology pic by Lost in Scotland