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Pat Grimm — Wed, 16 Mar 2011 21:57:42 +0000

Where are Interest Rates Going and Why?

Pat Grimm — Wed, 17 Mar 2010 20:17:09 +0000

Sometimes other people can say the things you’re thinking better than you. That’s the case here. I got the following from Sonja Riveland, Windermere Publicist. The author is a mortgage broker out of Missouri:

========================================================================== I was going to write my weekly update on Monday but then I thought I should wait until after the Fed meeting on Tuesday. So I decided to wait until after 2:15 on Tuesday and to do it all about the Fed.

What the Fed Said Last Time	What the Fed Said This Time	What Difference does it make…..
Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating.	Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing.	Deterioration is abating vs. stabilizing - a modest improvement but if that’s all the improvement we’re going to get in 6 weeks time, it’s going to be a long way back.
Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit	Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.	What’s the difference between weak labor market and “high unemployment? I’m thinking that it’s not an improvement, but I’m not sure.
Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls	Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.	Two important changes on this part - one good and one not so good. They went from saying business spending appears to be picking up to “rises signifcantly.” That’s a good thing. However when talking about buildings (both residential and non), the terminology got significantly worse since January.
To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.	To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.	Two important things in this section: 1) The Fed has reaffirmed that they will be done purchasing mortgage backed securities in 15 days. I’ve read a number of analysts who have said that the mortgage rate market is acting like nothing is going to happen. That makes for a rude surprise coming. 2) In January, the FOMC “hinted” at buying additional securities if needed. That’s now toned down significantly.

So what does it all mean for the mortgage world? A couple of thoughts:

The largest buyer of mortgage backed securities is leaving the market in 15 days. (And they really really mean it this time!) That’s not going to be without an impact on the mortgage rate markets. According to the analysts that I’ve read and heard, the predictions range from .25% in the first 30 days to a gradual increase of 1% or more over the next 18 to 24 months.
It shows an analysis of the economy that is mixed. There are parts that have improved since January but parts that haven’t.

We aren’t out of the woods yet…….

I’ll have a copy of today’s rates out to you within the next hour or so.

As always, call me if I can be of help.

Tom Vanderwell

(616) 292-7559 or thomas.vanderwell@53.com

West Capitol Hill Tour made easy

Pat Grimm — Fri, 05 Mar 2010 00:55:30 +0000

It’s More Like Super Monkey Ball than a Recovery

Pat Grimm — Fri, 04 Dec 2009 19:19:45 +0000

Based on the quote attributed to me in the PI yesterday morning and the spin of the story http://www.seattlepi.com/local/412880_housing03.html , you would think that the real estate market is in the throw of a complete rebound. That’s just not the case. It always amazes me what bits and pieces of a conversation actually make it to print. Assuredly, the story is never as good or as bad as these articles want to make it. Personally, I’d like to skip the drama and just be real.

There is so much information coming at us all the time that we seldom get past the headlines. There is simply too much information noise out there. Unfortunately, the only thing most people likely saw in the article yesterday morning is “Home Sales Up 81%”. They don’t stop to consider the fact that if you take a number … any number … and decrease it by 50%, and then subsequently increase it by 100%, you arrive back at the same number. That’s just simple math. But using increases and decreases by percentages without putting it in the context of a bigger picture is extremely misleading. The fact is that the reason things look so good for the real estate market recently is because they have been so gawd-awful for the past 2 years. Real estate equity has taken a huge hit since the fall of ’07. Values have dropped generally from 25 to 30% which translate into much higher drops in equity when you consider that most properties are highly leveraged by financing. Articles that paint the picture that everything is wonderful in real estate seem to summarily dismiss the pain and suffering that property owners have felt as a result of that hit. Granted, for many property owners, the equity loss has been just paper. But there are still many others who have felt the real sting of invested dollars that have simply evaporated… and they’re not going to return soon enough. It is what it is, but the resulting anxiety in the marketplace is not normal.

Have we returned to a normal real estate market? No. Have things truly stabilized? Far from it. When I contemplate the situation, I can’t help but think about the game that my kids recently downloaded onto my I-Pod Touch (I-Phone w/o the phone) called Super Monkey Ball. The basic premise of the game is to keep a rolling ball from falling off the edge of a flat surface by making quick adjustments to the position of the I-pod Touch. The game is really hard because every adjustment you make requires a counter adjustment to keep the ball on the surface. What a great analogy for our economy. The government seems to be playing a dangerous game of Super Monkey Ball, but it does create some big opportunities if you have some risk tolerance.

The adjustments made to the economy to stimulate the real estate market have been fairly extreme. Yes, the tax credit and artificially low interest rates have had a ripple effect on most price points and there’s no question that they have stimulated sales in the recent months. But I can’t help but wonder about the eventual counter adjustments. When? What? To what extent? I wish I could answer those questions. Arguably, the real estate market will have stabilized when it no longer needs tax credits to stimulate sales, when rates are no longer artificially low or high, and when private money comes back into both the residential and commercial markets. A good sign that we have returned to a normal market is when someone else besides the government is buying mortgage backed securities…. AND sales activity remains relatively constant. Until then, welcome to real estate Super Monkey Ball.

All this is telling me that if you’re in a position to do so, now is a great time to be buying real estate. That’s where the real estate Super Monkey Ball is rolling right now. There’s a window of opportunity that is only likely to last thru April of 2010. After that, the tax credit will go away and rates will probably rise dramatically. Windows of opportunity like this just don’t come along too often. Getting into position to buy property may take some doing, but I think you’d look back and say it was worth it.

Now more than ever, for most people, it makes sense to work with a good real estate agent. I know that sounds self serving, but even if I wasn’t in real estate, the information “noise” factor would lead me to that conclusion. While it’s all accessible and transparent, the amount of ever-changing real estate information is simply deafening … ok, over stimulating… unless you’re on top of it every day. In the absence of good counseling and interpretation, it is nearly impossible to make a real estate decision without second guessing yourself. That uncertainty can be extremely unnerving. I’ve got to think that most people do not want to go through that. The opportunities are out there if you know what you’re doing, but it’s easy to make a mistake too. Part of a real estate agent’s job is to sift through the noise and guide you to the conclusion, with absolute certainty and clarity that the real estate decisions you’re making are the right ones for you.

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Michael Rahmn — Tue, 24 Nov 2009 21:30:20 +0000

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Homebuyer Tax Credit Extended and Expanded

Pat Grimm — Mon, 09 Nov 2009 06:32:03 +0000

On Friday, Congress passed and President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 into law. The legislation greatly expands the First Time Homebuyer Tax Credit by making more first time homebuyers eligible for the credit and now includes homebuyers that are not first time homebuyers.

The current law is extended until April 30, 2010. Buyers have until that date to have a signed purchase agreement. There is an additional 60 day grace period to complete the financing. More first time homebuyers are eligible because the new law raises the annual income limits from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples.

Over 60 percent of current home owners will be eligible for a tax credit of up to $6,500 if they purchase a home by April 30, 2010. These homebuyers must have lived in their home for five consecutive years over the previous eight years to qualify. Qualified homebuyers can get the credit if they purchase a home for $800,000 or less as their primary residence between November 7, 2009 and April 30, 2010. The income limits are the same as the First Time Homebuyer listed above.

Courtesy of Washington Realtors

Did The Brix and Gallery Auction Buyers Get a Good Deal?

Pat Grimm — Mon, 28 Sep 2009 15:18:21 +0000

Last week, Seattle Real estate pundits were predicting that the Brix and Gallery auctions would yield prices that would be 30% off the original asking prices, but I wouldn’t have bet on it. Patterns from previous auctions at The Press (-17%), Queen Anne High(-32%) and Lumen (-38%) and the sheer number of units being sold at one time … 80 plus … suggested to me that the discounts would be greater. Interestingly, the pundits were almost dead on.

The numbers are in and it looks like the Brix and Gallery average auction prices came in at 30.37% and 32.47% respectively off original prices. Did the winning bidders get a good deal? Well, I’d have to get out my crystal ball to answer that but that thing broke last year. In all seriousness, time and the marketplace will ultimately define the good deals. My gut is telling me that these buyers did well, but, more importantly, I believe that they got a really fair deal. Each unit is different, but as an average, the final bid numbers seem to be commensurate with the adjustments we’ve seen in the marketplace and the risk that each buyer is assuming.

Let’s face it, condo ownership requires a certain amount of risk tolerance. Because of the fact that it’s communal living, it’s kind of like Forrest Gump and his box of chocolates … you never know what you’re gonna get. This is arguably more true for the new buildings that are lying vacant in a stagnant market. But the risk can vary from unit to unit, from building to building, from micromarket to micromarket and from region to region.

In my opinion, the single most important factor that is affecting the value of a condominium in our marketplace today is not the desirability of the lifestyle or the livability of the space … it is the stability of the building. (but more on that topic later)

The developer did what they had to do in auctioning off these units. In spite of what anyone may think of the process that is generated thru auctions … and now potentially bulk sales (see The Decatur at www.realogics.com) …it is the right strategy for all the stakeholders. The worst thing that can happen is to have a building with a bunch of vacant units that aren’t selling. Does this all translate into a good deal for the Buyers? Yes. The Buyers may have been able to negotiate hard on their own and gotten similar terms, but the volume of the other transactions all at the same time can’t help but lead to a more stable building and therefore makes it an even better value. Time will tell, but as long as they don’t try to spin these units right away, I think these Buyers will look back favorably on the deal they got.

Will Brix/Gallery Auction Re-set the Seattle Condominium Market?

Pat Grimm — Wed, 23 Sep 2009 23:33:41 +0000

Sunday, September 27th, condo developer, Schnitzer West, will be attempting to move 40 units at Brix on Capitol Hill and 43 units at Gallery in Belltown…all within a 6 hour period. The issue is that no one has ever attempted to sell…bang of the gavel…gone…80 plus condominiums in a single afternoon in the City of Seattle. It’s a little like trying to predict the outcome of the Seahawk game this weekend, but there’s no question in my mind that the outcome will impact Seattle real estate.

Which brings up some interesting questions: Is the market deep enough? Are there enough sideline players waiting for this kind of opportunity? How much more than the minimum bid will they go for? What percentage off the original list price will they go for? The outcome of this event could speak volumes in terms of where we really are with the Seattle real estate market … as it applies to condos.

But Schnitzer West isn’t the only one laying things on the line here. Every condo owner in the city has something at stake here as well, especially the condo owners with their property on or soon to be on the market. It should be noted that more than half of the dwelling units in the City are now condos, townhomes or co-ops.

Hundreds of potential buyers and curiosity seekers have been thru these projects over the past few weeks. It will be interesting to see how many show up on Sunday. On one hand, I’m visualizing low bidding and the outcome to be like ripping off a bandage and exposing a very ugly and painful sore with the realization that market values are significantly less than current expectations.

On the other hand, I can also see the potential for a lot of bidding and a ratification that the expectation adjustments that have already been made are true to the market. Either way, I think we’re going to find out where the market really is, and right wrong or indifferent, it is what it is. And that is bound to create some certainty in the minds and hearts of Buyers and Sellers, which can be stabilizing. … and after the past couple of years, I welcome stability.

As for me, I’ll have to choose between the Seahawk game and the auction on Sunday afternoon. I have to admit, the auction could be way more interesting

http://www.auctionbrix.com/index.php?keyword=brix%20condos

http://www.auctionthegallery.com/

Seattle Shifts To Less Than 50% Single Family Detatched Houses

Pat Grimm — Wed, 23 Sep 2009 21:22:25 +0000

Seattle is known as a city of neighborhoods and houses. The last census, however, shows that sometime in the 1990s single-family detached houses slipped to less than 50% of all dwelling units in the city. Construction since then has shifted the balance even more toward multi-family dwellings. Nevertheless, nearly 70% of all Seattle dwellings are still in buildings with fewer than 10 units.

Residential structures by units per building

Data derived from 2000 U.S. Census

Seattle is also a Twentieth Century city. Only about 1500 of the city’s 130,000 houses were built before 1900.

Seattle houses by period built

Data derived from King County Assessor’s records

In spite of the fact that the sold price for single family homes went down by 18% over the past 15 months, Seattle real estate is not cheap. The average sales price of a single family home is $480,000 and the median sales price is $396,000.

Fortunately, over the past 30 years the supply of owner-occupied housing has been steadily increased by the addition of condominium homes. While the lifestyle is very different, condominiums are less expensive than houses: the average sale price this year is $300,000 and the median is $269,000.

Seattle’s topography divides the city into natural neighborhoods with their own distinctive characters. Most neighborhoods offer a wide range of housing styles and prices, and the choices available to a purchaser are immense. Neighborhood Information is available to help you identify where in the city you might wish to locate. You will also find information on the styles of houses in Seattle and on current market conditions.

Condominiums in Seattle

Pat Grimm — Tue, 01 Sep 2009 20:08:41 +0000

What does a condominium look like?

A residential condominium is not a building. It is one form of shared property ownership. In a condominium, an owner is deeded exclusive ownership of a specific space together with a percentage ownership of common spaces, such as hallways, lobbies, outdoor spaces, walls surrounding the individual spaces, garage and storage areas, and the ground on which the condominium stands.

A Condominium Is Not a Single Family Home

The greatest difference between a condominium home and a single family residence is not that the condominium probably looks like an apartment instead of a house. (The properties in the two photos in this section are condominiums, not single family homes.) The greatest difference is that the owner of a condominium becomes a member of a Home Owners’ Association (an HOA).

Anyone purchasing a condominium should be prepared to participate actively in the operations of the HOA. The association, through a board of directors elected by the members, manages the common elements of the building. Its fundamental responsibility is to preserve the value for all owners by maintaining the building. Most boards employ professional managers to assist them.

A condominium purchaser should also be prepared to pay a fair share of the expenses of managing the property. HOAs are run on homeowners’ dues which are generally paid monthly to cover shared expenses such as water, sewer and garbage bills, insurance on the building, cleaning, maintenance of common areas, gardening. A well-managed condominium association plans for long term expenses like roofs and painting. The HOA budget should include reserves that will be sufficient to pay for such projects when they become necessary.

Condominiums: Newcomers in American Housing

Condominiums are relative newcomers to American housing. They were rare before 1961, when Congress enabled the FHA to insure purchase loans for condominiums. They became possible in Washington State in 1963, when the legislature passed the Horizontal Regimes Act. In the late 1970s growing interest in condominiums spurred the first major period of condominium creation in the Seattle area.

The creation of a condominium does not depend on new construction. Since a condominium is a legal structure, existing apartment buildings can be transformed into condominiums. A significant number of the better Seattle apartments built in the 1920s have been converted to condominium ownership.

Condominiums were preceded in Seattle by co-operative apartments. Because of rent controls imposed during World War II, many owners of apartment buildings found it more profitable to sell their buildings to the tenants rather than maintain them as rentals. A co-operative is a corporation which owns the building and issues “proprietary leases” for individual units to those who own shares in the corporation. There are two practical differences between a condominium and a co-operative. First, because there is only one lender who will finance co-op sales, co-ops are slightly more expensive to finance. Second, because the buyer of a co-op owns shares in a corporation rather than the individual unit, it remains common practice for the boards of co-ops to retain the right to refuse to sell to anyone for any reason — remember that Richard Nixon was famously turned down by a co-op on Manhattan.

Because of shared ownership of basic systems like plumbing and the roof, the purchaser of a condominium is legally entitled to receive either a Public Offering Statement (for new construction or conversion) or a Re-Sale Certificate (for re-sales). These documents include the basic rules which owners must live by — pets or no pets, rental restrictions, aesthetic controls, modification of units — and financial information. A purchaser should ask to have included 2 years’ worth of minutes of HOA meetings to gain information about any pending problems.

Condominiums in Seattle

Condominium homes can be found throughout the city, but there is a significant concentration at the center. Nearly 60% of Seattle’s condominium homes lie in the belt from Lake Washington to Puget Sound between the Ship Canal and I-90. About 15% are located in the northwest quarter of the city, especially in Fremont and Ballard. Another 11% are found in West Seattle. Most of the remaining 14% are in the northeast quarter. Southeast Seattle has only 3% of the city’s condominiums.

There are now about 25,000 condominium homes in Seattle. The ownership of buildings can be converted to condominiums, and about 6,000 of Seattle’s condominiums were built before the Horizontal Regimes Act. About 2,000 of these were built before 1930, and among those are some of the most sought-after units in the city; the best-known of these are buildings developed by Fred Anhalt. Since 1970 the addition of condominiums to Seattle’s housing has been steady: 5,000 in the 1970s, 6,000 in the 1980s, and 6,000 in the 1990s.

Since 2000 the rate of condominium development has nearly doubled. Through the end of 2006, nearly 5,000 new condominiums had been sold, and a substantial number of conversions have added to that total. At least 2,000-3,000 additional condominiums are under construction as of early 2007, including a large number of expensive units in the Downtown-Belltown-Lake Union area. The conversion of existing apartments to condominiums also continues.