Kenmore Undressed

October Real Estate Reports: Confront the Brutal Facts

1st, the Brutal Facts

The euphoria of this week’s Presidential election is quickly wearing off. The ten-million pound gorilla, ECONOMIC CRISIS, is sitting smack-dab in the middle of our national living room. Friday’s press conference by President Elect Obama was sober and somber. President Bush’s reassurances that his administration will help with this difficult transition helped magnify the fragility in the current American economy.

Then, there were the Real Estate market reports and press releases from the local multiple service and newspapers. I must say, up-front, that there is little in these reports that makes one want to rush right out and buy a house. In fact it’s obvious that the self-appointed leaders in the area aren’t facing facts:

The NWMLS press release from November 6th is a mish-mash of facts and figures mixed together with half-baked statements such as:

“Despite the uncertainty of the financial markets, home-ownership continues to be one of the most solid investments an individual or family can make.” (Lennox Scott)

Unfortunately, the report is peppered with facts and statistics that don’t support this claim. King Co. pending sales dropped 27% from a year ago. There were double digit drops in all counties. Listings have dropped, prices are down 7.4% from a year ago. Prices for single family homes fell about 9% last month compared to a year ago. These facts don’t justify an “optimistic” perspective in my book.

Let’s review some of the headlines in the local press:

Area faces bleak real estate forecast, SeattlePI, November 7

Median King County house price falls below $400,000, Seattle Times, Nov 7

House sales slip in county, SeattlePI , November 6th

House prices down again, expected to get worse, SeattlePI, Oct. 29

This all reads like a bad dream, doesn’t it? At times like this, I like to turn to those wiser than myself for advice:

Here’s the lesson:

Jim Collins in his landmark book, Good to Great, describes what he calls “The Stockdale Paradox.” Collins states that all great organizations embrace a worldview in which they “stoically accept the brutal facts of reality while at the same time maintain an unwavering faith in the endgame, and a commitment to prevail in spite of the brutal facts.” (paraphrase). This concept is named after Admiral Jim Stockdale who was tortured over twenty times while in captivity during the Vietnam War. One of the key moments in Good to Great is when the author asks Stockdale: Who didn’t make it out of the prison camps? His answer: “Oh, that’s easy, the Optimists.” Stockdale simply said that those who didn’t survive lived with false hope; they didn’t confront the brutal facts of the current reality. Tough words, indeed, yet I can’t help but relate them to the current “brutal facts” in the real estate market. There is a disconnect between what experts hope will happen and what is actually happening in the market today. I would encourage you to read more about Admiral Stockdale but for now let me tell you what I think:

1) The facts show that this is the most challenging real estate market in recent memory.

2) The facts show that prices, sales, and market confidence are moving downward.

3) The facts show that lenders ARE lending. Homes are being sold. People are buying.

4) The facts show that national/international challenges are impacting the way in which banks are lending money.

5) The facts show that we may be in this situation for a long time.

6) The facts show that even the “leaders” are struggling to make sense of the market.

Conclusion: Confront the Brutal Facts. Toughen up. Realize that there are opportunities out there, you’re just going to have to work harder and be smarter to prevail. Deal with it.

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

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

Explaining the Current Financial Crisis: This American Life’s “Giant Pool of Money”

I’m writing this post for those of you who are still confused and dumbfounded by all the explanations of the current financial crisis. “How did we get here?” is the question on everyone’s mind these days. Well, I finally had an opportunity to listen to This American Life’s program entitled: “Giant Pool of Money.” My friends, this should be required listening BY ALL AMERICANS. It offers the most articulate explanation of this complex situation I’ve found.  Just click on the picture below………..enjoy…..

Foreclosure: A Sad Reality

I’ve avoided using the “F” word because it’s one of the most devastating situations for anyone to go through. It symbolizes the anxiety and fear that many home owners face even in good markets. Even one of my neighbors here in Kenmore went into foreclosure recently. Fortunately (so far), the Seattle Area has not seen the huge numbers of foreclosures that CA, NV and numerous other states have experienced. Nationwide, foreclosures are up 115% as compared to Washington State at 20%. See more about this in the September 19th Seattle PI article entitled:  “Foreclosure rate here below U.S. Average”.Also, I’ve attached a powerful 12 minute film clip from http://mortgagenewsdaily.com   that shows the sad reality of foreclosure in an area of the country that has been hard-hit. It’s worth watching. Just click on the pictures below:

Some Fun Real Estate “ART”

Sometimes art captures perfectly the times we live in. I thought it would be fun to post these wonderful bronze characters given the fact that money and housing have been in the news 24 hours a day. They are called: The Marriage of Money and Real Estate, installed just off Roosevelt Island (NYC) on December 1, 2005,  sculptural installations by Tom Otterness.

As a Realtor working in a fairly tough market, it’s nice to know that someone has a sense of humor about real estate.

Pictures by Wally Gobetz

The Cost of Selling a House in the New Millenium - A New Series

There are few things in life more emotionally charged than the value we place on our home. When the day comes to sell our house, we instantly become “value experts.” We begin to pay attention to the other houses for sale in our neighborhood or town. We hit the internet to compare prices. We seek out valuations from sites such as Zillow. We become arm-chair economists. We go to the bookstore and buy all the new tomes about selling a house. WE KNOW IT ALL!

Armed with all of this information, we then interview every real estate agent we can get our hands on. After all the interviews we discover, to our utter surprise, that it costs A LOT of money to sell a house. Some Realtors want 6% of the sale price in commission! Yikes! But, then there are other agents who will put us on the local multiple service for several hundred dollars. This gets us on the Internet but the rest of the process is left up to us. Hm, that sounds good but all our research revealed that there’s a lot to selling a house. Even without an agent, it looks as if we’re going to spend money. So we have a couple of choices:

A) Do I sell my own house (know as For Sale by Ower or FSBO) or

B) Do I hire a Real Estate Agent?

But wait, are there other choices?

Allow me to answer this: YES, there are other choices you have when selling your home. In this series we shall take a close look at how a house gets sold in the current market, what the costs are and why there are more options for homeowners than ever before.

So why hire an agent? Stay tuned for the answer.

Pictures courtesy of:  giveawayboy, crawfishpie, rogiro on flickr.com