Kenmore Undressed

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

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.

Insatiable Curosity: A Realtors Biggest Headache!!!

Ouch! Being curious can be very interesting but it can also hurt my brain. At the beginning of each month I like to ponder local real estate statistics. Because my practice focuses on North King and South Snohomish Counties, I spend time thin-slicing some of the general numbers to try and find out what’s really going on out there in the marketplace. Today I wanted to look at the September sales figures for King County. I think you’ll find this interesting:

Of the 1283 single family homes that sold in September, it’s interesting to note that the average days-on-market is 72 days. Frankly, I find this quite positive in very difficult times. If I were a betting man, I’d say these sellers and their agents did a good job of gaging the market. In order to examine this more closely, I chose to focus-in on those homes that sold from $400,000 - $449,999. I did this because the price is close to average for King County. This particular price-point sold in 64 days which, even in a good market, is a respectable number. So what happened? Here are some details:

1) Only 57% of the homes in this category actually sold in the 64-day time period. 84% of the remaining 43% took well over 100 days to sell.

2) Only 6% (25) of the 1283 sales sold for 100% of the list price. On average, homes sold for 94% of list price. 25 of the homes sold for under 90% of list price.

3) A surprising 95% of the sold homes were re-sale.

Based on these findings, I believe it’s more important than ever for homeowners to think carefully about selling their homes in the current market. There is obviously a group of buyers out there who have money to purchase a home. How you go about pricing and marketing your home are extremely important. Also, if you choose a real estate agent to help you sell your home, make sure he/she knows your local market. Make sure he/she has a concrete plan to “correctly” market your home. Finally, make sure the potential agent has your best interests in mind.

Insatiable Curosity: A Realtor’s Most Important Asset

 I’m one of those guys who is curious about almost everything. When it comes to my reading list I’m usually plowing through 3 or 4 non-fiction books, several magazines and a huge number of publications from my Google Reader. I like to stay informed. It’s a big part of my job as a real estate agent and, believe me, one can never keep up with the mountain of information out there. I thought it might be fun to show you how I go about the process of formulating some of my professional opinions about the real estate market. Let’s take the current financial meltdown as an example. There are a lot of economists claiming that the one commodity most needed in the market today is ”confidence.” I don’t disagree with this idea, but how do I articulate the notion with some facts my clients can understand? Here’s how I research subjects like this:1) I first went to Inman News which is an excellent source of information. There I found an article entitled “ Divided views on homeownership benefits” which points out that a large percentage of both home owners and non-homeowners intend to stay in their current residences for the next 12 months because of the turmoil in the marketplace. If you want to read the whole, fascinating article click on the picture below:You’ll notice that this article has a link to a survey (highlighted). This survey is entitled ”Financial Mortgage Fallout Creating ’Crisis of Confidence’ Among Home Buyers“ and was compiled by Trulia which is one of the most comprehensive, well-respected real estate websites today. The article is an enlightening and somewhat disturbing assessment of homeowner confidence in the current market. Click on the picture to read the whole article. Once I read these articles, I can then pass on relevant information to my neighbors here in Kenmore, WA. As it turns out, most Americans still believe in home ownership but many buyers are putting their home search on hold until the economy settles down. I believe that knowing these facts makes me a better realtor and helps me serve my clients in an intelligent way. 

Kenmore Statistics: Sales Figures from September

It’s October 1st and we are quickly coming to the end of a tumultuous year in real estate. September wasn’t exactly an active month for the sale of single family homes in Kenmore. I ran reports for the sales from this year and September of 2007. Sales were down -55%: 18 homes sales in 2007 and 10 this year.

Here are the sales from last month:

Several key statistics are of note: 1) even though the report showas a 100.14 Sale Price/List Price ratio, the actual number is more like 94% and, 2) days-on-market are 138. Compare this to last year:

You’ll note that the days-on-market were only 49 last September. The Sale Price vs List Price ratio was slightly higher at 97%. One bright spot is the fact that the median prices rose slightly from last year.

The real challenge facing the market today is the inability of buyers to obtain financing due to the severe tightening of credit. We may see this trend continue until Congress passes the current bailout legislation.

New Construction Numbers in Kenmore, WA - Resale Is Doing Much Better

It should be no surprise that new homes (those built in 2008) have not been selling at the brisk pace of several years ago. Far from it. Since January 1, 2008, twenty-five (25) newly constructed homes have sold in Kenmore.  Resale has been doing much better at 101 sales. 50% of these homes sold for under $500,000. All of the new homes sold for over $500,000. I believe that the current market trumoil is taking its toll on home sales in general; however, I also think that new construction is facing some tough competitioin from the resale market. There are almost 2-times as many resale properties on the market right now. They are selling for about 8% less than original list price which means those sellers are being more flexible in their negotiations.

Overall, sales of new homes has been lethargic. Please turn your attention to the charts below:

As the turmoil in Wall Street unfolds and we move into the 4th quarter and Presidential elections, I wonder how the real estate market will fair? Properties are selling in Kenmore in the face of some fairly scary economic times, so it’s not the end of the world…yet. The important thing to recognize is that you should do your homework before jumping into (or out of) the real estate market.

Real Estate Statistics: September is Ending Soon

It’s always sobering to take a look at things going on in your own neighborhood, especially when so much attention has been focused on the “big picture” market challenges. Let’s take a moment observe what’s going on here in Kenmore:

There are a lot of active listings in Kenmore today. The majority of these homes are selling at the  $450,000 - $600,000 price point. Of the 214 active listings, over 70% have reduced the list price. The average days-on-market don’t look terribly bad; however, since the beginning of September there have only been 5 closed sales. Some good news is that there are 26 pending sales; however, most of these homes have only gone pending after well over 5 months on the market. Let’s hope some of them close at the end of this month.

The charts below are sobering:

I’ve expanded the report below so you can see the details.

The numbers speak for themselves. Almost 36% of the homes for sale in Kenmore are new construction. The average days-on-market are running close to 200. As I mentioned above, very few of the pending sales right now received offers quickly. It’s taking a long time to sell a house in Kenmore.

Kenmore, WA - Home Sale Statistics for August

August was a slow month for home sales this year in King County. The good news is that there wasn’t much of a change in Kenmore from last August. Take a look at the chart below:

There were only 17 sold homes in Kenmore last month, but one year ago there were 18 sales. This is only a 6% drop as compared to an overall drop of 43% in King County. Median prices have dropped a bit since the beginning of the year. In King Co., they have dropped 7% (the median price having dropped from $460,000 to $410,000. Kenmore faired slightly better with at drop of only 5% (from $453, 450 to $430,000). 

In the Seattle Times article from September 10th entitled, “King County home prices in August slide back to April 2006” we have seen a significant erosion of home prices in the area. It’s important for home sellers to understand that the market has been very tough this year. We may not see positive movement until 2009 as we are fast approaching the national election and we will not see significant changes in the capital markets until the Fannie Mae/Freddie Mac bailout actually produces some results.

Another factor to consider is the absorption rates of homes in King Co. Remember, absorption rate means the percentage of homes absorbed (sold) as compared to the number of homes available in a given time period. The charts below show, clearly, that home sales are stagnant. Even with a high inventory and dropping prices, buyers are holding on to their money and the lenders continue to be ultra-conservative. As a realtor, I think those of you thinking about buying a home in the near future are going to have a huge opportunity. The most important thing for you to do right now is consult with your lender to ensure that you can get a loan, then start looking now. Home owners, unless you must move right now, take a deep breath, enjoy your home and exercise some common sense.

When to Take a Vacation: When Nothing is Going On!

We met a very nice couple from Richland, WA in Santa Margherita, Italy in the park.

Now that my jet-lag has melted away and I’m thinking about real estate again (a little), I have a confession to make: I DIDN’T THINK ABOUT WORK AT ALL FOR THE LAST FIVE WEEKS. This really hit me when we bumped into a couple from Richland, WAin Santa Margherita. We met them in the town plaza and after we talked about Italy, they asked what we do. When I said I am a realtor they asked how the market was in Seattle and, half jokingly, asked how I can take such a long vacation? The questions hit me hard because 1) I wasn’t paying attention to the market and, more importantly, 2)  a feeling of guilt washed over me….gosh James you should be home working hard, making money, being productive (Mr. Freeze, The Financial Curmudgeon reared his ugly head). I simply told them that nothing was going on back home so it was the perfect time to take a vacation. We finished up the conversation, said goodbye, and we went on to spend another fantastic week in Italy.

Now that I’m back, was it really a good time to go on vacation? As it turns out, the answer is an unequivocal YES. Check out these stastics from King & Snohomish Counties for August:

KING COUNTY SINGLE FAMILY HOME SALES

Total sales of single family homes in King Co. were down 41% from last August. Kenmore didn’t fair too badly. 18 homes sold last August and 17 sold this year (-6%).

KING COUNTY CONDO SALE REPORT

Condo sales in King Co. were down a disturbing 65% from last year. Kenmore faired even worse with only 3 condos selling as opposed to the 21 in August of 2007 (-86%).

SNOHOMISH COUNTY SINGLE FAMILY HOME SALES

Single family homes dropped 52% in Snohomish Co. with only 429 homes selling (885 in 2007).

SNOHOMISH CO. CONDO SALES

Snohomish Co. condo sales faired slightly better than King Co. dropping 55% from 264 in August 2007 to 120 this year.

Statistics: July in Kenmore, Lazy Days of Summer

The real estate market in Kenmore is ending in much the same way the weather has: cool and uninspiring. Please keep in mind that homes have been selling; however, the days on market for solds have risen to 113. Fully 26% of the sold homes are new construction. The good news/bad news statistic is that homes are selling at 92% of list price. This means qualified buyers are in a good negotiating position. It also means that sellers need to be more aggressive in their pricing. So here are some reports for you to ponder:

There is still a large inventory of homes in Kenmore. Many of these homes have been on the market well over 100 days.

The important thing to keep in mind regarding “pending” sales is that they represent the level of actual sales activity in a given month. The chart above illustrates that 18% of the available homes are in the process of selling. This percentage or absorption rate isn’t encouraging. We have 8 months of inventory on the market.

Now the chart above shows the total number of sales in the last 3 months. And the next chart shows closed sales in July:

As you can see, 17 sold homes sold this month. Not exactly a brisk market. I have no reason to believe that August will be more active. There remains a lot of uncertainty in the marketplace and with the election looming, I don’t expect the end of 2008 to be a banner year.