Kenmore Undressed

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.

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.

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. 

“Kenmore by the Lake” It really is!

A very nice lady called me from California last week. She wanted me to do a market analysis of a vacant lot she owns close to Inglemoor High School here in Kenmore. During the course of our conversation, I asked her why, of all the agents in the world, she called me. “Oh, your blog makes Kenmore look so beautiful!” I was surprised and flattered. I really do try to give my readers a sense of Kenmore, but I haven’t posted that many pictures of Kenmore “by the lake.” That’s about to change:

The pictures above were taken from Kenmore looking directly south at Lake Washington.

These lakeside pictures were taken on the shore of Lake Washington in Saint Edward Park.

Kenmore’s position at the north end of Lake Washington offers its residents close proximity to shopping, transportation and natural beauty. I enjoy Kenmore because it’s only a short commute to Seattle and yet lies at the crossroads of several main freeways. This allows us easy access to many other wonderful communities such as Woodinville, Lynnwood, Bothell, Kirkland and many others. Come visit us sometime!

Clean and Sober: September Statistics and Some Personal Thoughts About the Market

You know the saying: “Admitting you have a problem is the first step in solving it.” Well, in the Pacific Northwest section of the Seattle Sunday Times (Oct. 12th) the CEO of Windermere Real Estate Services, in a moment of perfect clarity, called it like it is. Quoting a blog post of one of his agents he wrote: TAKE YOUR HOME OFF THE MARKET (click the text for a larger view).

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Mr. Woods has spoken words of wisdom in a market place drunk on greed and delusion. It’s time to sober up and come clean.  Right now, lots of sellers need to sit down and ponder their motivation for selling. If it isn’t absolutely necessary to move, then consider staying put. How simple can it be? Anyone following the news knows how crazy things are right now. It’s time to start thinking clearly about life’s fundamentals and make decisions based on a long time perspective. There’s nothing new in this.

Here are the numbers for September sales of single family homes in King Co. (click on the picture)

Overall, it’s not the end of the world. Sales in King Co. dropped 23% from last September but HOUSES ARE SELLING. Keep in mind that in order to sell a home, it must be “dressed for success,” marketed well and priced appropriately. In September, homes sold for 7% less than a year ago. If you’re not willing to pay the price to enter the market at this time, don’t. I believe that after the national election and after the banks and government have worked through the financial crisis (this may take several months), we may see the credit markets loosen up and start lending again. Until then, relax, enjoy your home and think about a better future.

City-data.com - Get to know your favorite city

There are a huge number of statistical resources on the internet. One can literally spend hours pouring over population trends, crime stats, housing prices, you name it. But, there are only so many hours in the day. So where does one find a site that encapsulates data in a coherent and concise way? I think www.city-data.com is an excellent resource. If you’re a resident in Iowa and want to find out about Kenmore, WA because your employer is relocating you, here are some of the interesting statistics you can review:Some of the other very interesting breakdowns include: number of government employees, building permits, crime statistics, educational attainment…..whew, it goes on and on. The only thing I’d like you to keep in mind is that some of the statistics aren’t current (this is not uncommon because it takes a long time to assemble some data). But, go ahead and look through this website. You may learn something for your next cocktail party

Reality Check: A Short, Sharp Analysis of the Local Real Estate Market

I like this picture. A nice juicy brain, suspended in a clear liquid cocoon. Safe, locked in time; unchanging. It’s emblematic of the obsolete mentality of both the Public and the Real Estate Industry:  ”PUT YOUR BRAIN IN A JAR. THERE’S NO NEED TO THINK ABOUT THE PROCESS BECAUSE WE’VE ALWAYS DONE THINGS THE SAME WAY!” As a Realtor (c), I spend a lot of time pondering the market to discover the best way to solve my clients’ challenges. After taking a few moments to look at the current market in Kenmore (my home town) I’m convinced that the same old process of selling one’s home (e.g. hang a sign in the front yard, putting flyers out, doing open houses, running an ad in the local paper, etc.) with or without an agent is an inadequate strategy in the current market. Allow me to point out some facts about Kenmore today:

• There are currently 204 active, single-family-homes listed with the multiple service. This inventory number has not changed for months. By the way, this is a lot of houses for sale in a town the size of Kenmore.
• Only 18 homes sold in Kenmore in the month of September. 50% of these homes sold for 90% of their listed price. Most of these homes took upwards of 6 months to sell.
• BIG FACT: 53 of the active listings have entered the market in the last 30 days.
• LARGER FACT: Only 50% of these new homes are actually new listings. The other 50% have been listed more than once. In some instances they have been listed three or four times often with different real estate agents.
• UGLY FACT: Many of these homes have been on the market a long time (sometimes well over a year) and they’ve gone through numerous price reductions.
• SIMPLE FACT: THE OWNERS AND AGENTS NEED A NEW STRATEGY OR GET OUT OF THE MARKET. WE NEED TO MAKE REAL ESTATE A NO-DELUSION ZONE.

Dear reader, please pardon my candor but both the real estate agents and the sellers are at fault. Most of the homes now languishing on the market were overpriced when they first hit the market. The market has been in decline for a year now, so there was no excuse for the inflated prices. Sellers were living a delusion and the agents were still in a “listing-equals-an-easy-paycheck” mode. I think Ardell DellaLoggia, the gran dame of Rain City Guide hit the nail right on the head in her recent blogpost entitled “This is time for serious people“:

“It is not enough in this market to have “heart” or to “care about your clients”.  Serious times call for serious leaders, and we are the leaders on the ground in the everyday real estate transaction.”

In upcoming posts I am going to deconstruct this real estate process so you can better understand why many of the criticisms of the real estate industry are true and how to look at the sale of real property in a way that fits our current circumstances.

Brain by Gaetan Lee

Bastyr University - Natural Health Sciences and a Beautiful Location

Yesterday I wrote about my visit to Saint Edward State Park. What I forgot to mention was yet another Kenmore Treasure: Bastyr University which is right next to the State Park. Bastyr is world famous as a center for advancing knowledge in the natural health sciences such as naturopathic medicine, acupuncture, Oriental medicine, nutrition, health psychology, exercise science and herbal sciences. It’s quite an amazing place and it’s right in our backyard. Bastyr is also important to the Kenmore economy as it is the largest employer in the community. It offers conference services, meeting rooms, a vegetarian cafeteria (open to the public) and overnight guest rooms. 

The last time I visited the Bastyr campus was for a wedding. Yes, a wedding in the University Chapel which is a beautiful non-denominational, European-style church built in 1958. Bastyr truly is an important institution in our town. Check it out sometime soon.

September 2008 Month-End Statistics: King Co., Snohomish Co. and Puget Sound Numbers

Statistics from September are beginning to pour out from the local listing service and other sources. There have also been a number of local journalists reporting on the King County market. Generally, the industry spin is quasi-positive in that we saw a 4.18% increase over last September (2295 in 2008 vs 2203 in 2007). I believe the absorption rates tell the real story. Below you will find absorption rate charts for King Co., Snohomish Co., and the whole Puget Sound. Just click on the charts to see the full charts:

KING COUNTY

SNOHOMISH COUNTY

PUGET SOUND

It’s apparent that sales have been flat for many months now. We did see a slight drop in inventory; however, the absorption rates have been hovering around 15% in King Co. and 11% in Snohomish County. The four-county, Puget Sound numbers are also around 11%.

My real estate instincts tell me that we won’t see much of an upward trend in the housing market until next near. The bailout legislation is going to take a while to show results (if any) and the election has been consuming the public. I’ve been speaking with a lot of home owners these days who are worried about the value of their homes. My professional real estate agent advice right now is to to stay put unless you must move. I’ve always told my clients not to think of their home as an investment. One must take a long-term perspective: enjoy your home, raise your children there, make it a place of your own.