Let’s check out the three price tiers for the Seattle area, as measured by Case-Shiller. Remember, Case-Shiller’s “Seattle” data is based on single-family home repeat sales in King, Pierce, and Snohomish counties.
Note that the tiers are determined by sale volume. In other words, 1/3 of all sales fall into each tier. For more details on the tier methodologies, hit the full methodology pdf. Here are the current tier breakpoints:
- Low Tier: < $273,625
- Mid Tier: $273,625 – $402,694
- Hi Tier: > $402,694
The tier breakpoints shifted slightly upward again in July despite a decline in the overall index, which would seem to indicate a continuing shift in the sales mix of homes away from the low end toward the high end.
First up is the straight graph of the index from January 2000 through July 2009.
The high tier actually increased slightly from June to July, while the middle tier dropped the most. The “rewind” situation held steady for the month, with low tier sitting about where it was in April 2005 and the middle and the high tiers at May 2005 levels.
Here’s a chart of the year-over-year change in the index from January 2003 through July 2009.
With a month-to-month increase, the high tier’s year-over-year picture improved the most in July. Here’s where the tiers sit YOY as of July – Low: -17.4%, Med: -14.3%, Hi: -15.3%.
Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.
The best recovery hundreds of billions of government “stimulus” can buy.
(Home Price Indices, Standard & Poor’s, 09.29.2009)
Ray Pepper » Sep 30, 2009 at 8:12 am
So the graph appears to look like a recovery? Not to me! Looks more like a pause………
I’m still steaming over Steve Tytlers friend who he states is paying on a Mtg of 500k while the home is worth 250k. The guy is a Broker as well?? I think Steve threw that out there to play with our heads. I don’t care if his “wife” forced him into this decision. I’d leave her with the home and begin 5 years of renting a nice condo.
Good God!
Maybe his Broker buddy should look into this….
http://rismedia.com/2009-09-28/op-ed-60-million-mortgages-may-have-fatal-flaws/#ixzz0SYdrQKfC
Back to Basic » Sep 30, 2009 at 8:36 am
Location, Location, Location
Anon. » Sep 30, 2009 at 8:44 am
Ummmm… It looks like the high tier fell most.
The Tim » Sep 30, 2009 at 8:48 am
RE: Anon. @ 3 – Whoops. Sorry about that, posted last month’s graphs. Fixed now.
Anon. » Sep 30, 2009 at 8:53 am
Maybe you’re not done yet, but it looks like only one of the graphs was fixed..
Also, Tim,
To what do you attribute the increase? Would this just be the seasonality?
The Tim » Sep 30, 2009 at 9:07 am
RE: Anon. @ 5 – I updated all of them, your browser has probably just cached them or something. Try a shift-refresh of the page.
As far as the uptick, it’s definitely more than seasonality. I think it is most likely due to the various government interventions in the economy in general and housing in particular. Despite the fact that the peaks of each Case-Shiller-tracked market were spread out by nearly two years, virtually every single market hit a sharp bottom and has spiked up simultaneously this summer.
See the charts I posted over at Redfin here. This summer spike is pretty clearly not a result of natural market actions or yearly seasonal factors. That said, it would appear that Seattle is being affected almost the least by this government meddling. Quoting from my Redfin post:
Back to Basic » Sep 30, 2009 at 9:38 am
The theory is: 1) Many home owners here are still above water (22% down off 50~60% gain); 2) Job loss here is still better than national average (can’t move to other state if the employment situation is worse there); 3)people still need place to live (since most of us are are still sideline so owner are stuck); 4) home owner don’t take rent/own equation too serious if they can go through this crisis (assume job is stable and equity market recover); 5)Home owner are still ethically responsible to their debt and FICO score, so they don’t walk away like we wish; 6) upper end property down quite a lot so many people want to trade up. 7) Settle is still an attractive to live and work ( I have been many place in the US and around world). 8) Money is cheap to get if you can get it. In summary, the side liners are waiting and home owner are holding as long as they can hold to their property. In the mean while, FED is print more money and sooner or later inflation will comeback. The hard asset of housing is the best to fight with inflation. While return of our hard cold cash is near zero and inflation is on the horizen (look at gold and oil price compare to 10 year ago, house is still not over inflated). So my conclusion: The housing correction may or may not further in Seattle, too many sideliners here including me are waiting the best property at bottom price which may drive the price very quickly if everyone realize the economy is getting better and employment is back. But it will be a little late since the FED is raising the rate. The only factor that may change this is the shadow inventory (foreclosure that bank holds). To me, I am ready to jump in before everyone else, to take the risk before the curve. This is the time, this winter to go house hunting.
Sam » Sep 30, 2009 at 9:46 am
http://finance.yahoo.com/tech-ticker/article/346319/Massive-%22Shadow-Inventory%22-Overhang-Will-Keep-Pressure-on-House-Prices?tickers=tol,kbh,len,itb,bzh,xhb&sec=topStories&pos=9&asset=&ccode=
Good Article on Shadow Inventory today on yahoo.com
Back to Basic » Sep 30, 2009 at 10:06 am
The banks are not stupid, they are not going to release the forcloures to the market in a rush. The bank has FED support and life support with almost free money. They adopt the supermaket shelf buy putting limited supply on the shelf to balance the supply and demand. The the price won’t crash (in the end, bank will lose more). So shadow inventory will be digested over time while new home build is still on hold. US population will continue to grow and economy recovery is coming sooner or later. Sideliners can’t live in rented place forever. We will come back someday and find houses are still not affordable just like bubble time and all these years waiting and hoping are just a waste. Now it is the winter of housing and probably the best time to strike a deal assuming many owners are still price their property too high but it won’t sell. So if property price is right based on location and condition, it will be sold quick. We have a large inventory to choose from, so don’t afraid to low-ball your offer and who knows if you are lucky….
AMS » Sep 30, 2009 at 10:11 am
RE: Back to Basic @ 9 – “The banks are not stupid, they are not going to release the forcloures to the market in a rush. The bank has FED support and life support with almost free money. They adopt the supermaket shelf buy putting limited supply on the shelf to balance the supply and demand.”
Do you actually listen to or read what banks put out? Also how does an individual bank determine that there are too many other foreclosure properties on the market by other banks? I know there are personal sellers who hold back, but having empty property setting is just dead weight for a bank, which is generally better off dumping the property and getting cash sooner.
There is no foreclosure sale price fixing.
Back to bascic » Sep 30, 2009 at 10:58 am
Real estate are local. So far we are down 22% from peak. Most home owner here who bought before 2005 are still above water. So shadow inventory is not as severe as other part of region. Why would people turn their property to bank if they have equity in it. FED determined that fight foreclosure is more important for the economy than fighting inflation and deficit at the moment. Banks knows this clearly. Even at near zero rate, people like us are still put money in the bank for liquidity and safety. Dare not to put to wallstreet if you are plan to buy a house in the next few years. Bank is just like OPEC, they would rather stable the price (or called price fixing) than dump foreclosure to let price crash. Since their are afraid to lose money so they tight the credit even though FED give them free money. Many people won’t be able to get loan. Since home ownership is 65% so the majority of people want their home price to be stablized. Only a very small percentage of people can’t afford to buy or don’t want to pay at current price are talking down the price and to catch a crash price. It’s nothing wrong about this. The market will sort these things out. Like I said before, house ownership is not for everyone, someone can’t afford it forever and someone don’t want to own it forever.
Dave0 » Sep 30, 2009 at 12:00 pm
RE: Back to Basic @ 9 – “The banks are not stupid”
I beg to differ… If that were the case, this real estate bubble would have never happened.
Kary L. Krismer » Sep 30, 2009 at 12:09 pm
I don’t know if stupid is the right term, but they sure are not very flexible–able to adapt to changing conditions.
Back to bascic » Sep 30, 2009 at 12:50 pm
By Dave0 @ 12:
We are all response for the real estate bubble: The demand for a better living, the cheap money supply, the hope that asset appreciation. I am sure this is not the 1st bubble and never be the last one in human history. I was lucky I didn’t get into at the peak but hope that I will get into at the fair price level. In the end, you are the one who make the judgement.
patient » Sep 30, 2009 at 1:50 pm
RE: Back to bascic @ 14 – It might be that the responsibility is shared to some extent but the brunt of the pain is with the banks. So yes they are stupid, very, very stupid.
grumble » Sep 30, 2009 at 3:08 pm
I’d put more of the fault at the homeowners who bought more than they could afford, and are now looking for handouts/mods to stay in homes they should not have had in the first place!
BofA stated many of the HAMP mods are failing due to documentation. Why? Because borrowers lied on their application, and now can’t come clean. They should be kicked out of their homes and prosecuted for fraud.
By patient @ 15:
HappyRenter » Sep 30, 2009 at 3:11 pm
My wife and me have just been at a homebuying seminar where somebody of Homestreet explained the homebuying process. He told us that banks like Homestreet have empty new houses which were constructed with loans given by the bank to developers. Since the developers are not able to sell and pay the loan back to the bank, the bank sells these houses at a very low interest rate, i.e., 4.1% and no money down. I find this interesting. It means that it is better for the bank to easily lend money to somebody who buys the house at a possibly high price instead of simply lowering the selling price and get immediate cash back. How long will the banks be able to keep the prices high and lend money at low conditions to get rid of these houses?
kfhoz » Sep 30, 2009 at 3:33 pm
By patient @ 15:
Anthropomorphizing banks is not all that useful; institutions don’t have pain and can’t be stupid.
Bank execs got to keep their big bonuses from the boom years so they are not stupid. If I was one of those guys I would be still laughing … um … all the way to the bank.
Urban Artist » Sep 30, 2009 at 3:39 pm
I have talked to so many people that think prices will go up to normal in two years. Of course their idea of normal is bubble prices. I have a friend who is renting her house for two years so she can ask more for it, even she thinks Ballard is special and the bubble prices will come back. Since when did bubble prices become the norm. If the prices are not sustainable for most people to buy with out a struggle now, what magic event is going to happen in two years that is going to change that?
patient » Sep 30, 2009 at 4:03 pm
RE: Urban Artist @ 19 -
“Anthropomorphizing banks is not all that useful; institutions don’t have pain and can’t be stupid.”
Thanks for explaining that, I’m feeling enlightened.
“Bank execs got to keep their big bonuses from the boom years so they are not stupid. If I was one of those guys I would be still laughing … um … all the way to the bank.”
I highly doubt it, the people I know in CEO and executive positions are all about the power that comes with the position and the income. A golden parachute would be a poor substitute for feeling almighty, fly corporate jets and play with the big boys.
Ray Pepper » Sep 30, 2009 at 4:25 pm
RE: HappyRenter @ 17 –
I just sold a HomeStreet Bank financed home. Last I heard they have a C & Desist order on them like the Venture Bank which is now bye bye. Yes, the bank takes it on the chin until all these homes are gone. Keeping prices high? They will come down until they are all gone. My Buyer got a sweet rate on the new home plus lender paid closing costs but I still feel the sales price was too high. However, she loves the home and in the end it was her decision. She got about 5000 from us which helped her as well.
Doug » Sep 30, 2009 at 8:00 pm
RE: Back to Basic @ 7 –
It is so difficult to know when to jump in. I’m a first time buyer that was priced out during the bubble. Now I have over 20% saved for a down payment. I waiting for the bottom. Prices are flat. Many parts of the country have risen. Some say double dip recession. Do I wait for prices to rise 10% and be safe? Prices may also decline another 20%.
David Losh » Sep 30, 2009 at 9:27 pm
RE: Doug @ 22 –
Prices will decline this year, but there are some good opportunities to buy below market. Octobter 15th to December 30th are good times to buy. There is another opportunity in January to mid February. Be patient.
Doug » Sep 30, 2009 at 10:01 pm
RE: David Losh @ 23 –
Maybe I should start looking. Where is a good place to start? zillow, redfin, fsbo? I’m interested in getting the lowest price and best deal. I’m not in any rush. If the house needs some minor work that would be ok.
buystocks » Sep 30, 2009 at 11:51 pm
Doug,
Just do lots of research, and consider all plausible scenarios. For me, rather than predict, I like to consider the worst and best scenarios of buying or waiting.
BUYING:
Best Case – You bought at bottom and get a 10% yearly gain on a highly leveraged asset.
Worst Case – You bought not even close to the bottom. It drops another 60% in your highly leveraged asset. Your 20% downpayment is gone forever, your asset can’t be sold without bringing the other 40% to the table, and you can’t rent for anything near your monthly mortgage. Considering wages and employment would likely decrease also in this scenario you’d likely be unable to afford payments and then need to foreclose and check in to the nearest family member’s house or neighborhood shelter.
WAITING:
Best case – The above worst case. Your downpayment is now worth lots of money. You buy a nice home and live comfortably even on the decreased wages.
Worst case – The above best case scenario. The market appreciates, and you end up paying 10-20% more for the house than you could of it didn’t wait.
We all have different risk tolerances. After I’ve put myself through the above exercise, I felt the worst case of buying would be much worse than the worst case of waiting. I was afraid of two things, buying such a highly leveraged asset in a risky environment, and of living in a shelter. So for now, I’ve chosen to keep my downpayment for now and wait.
Scotsman » Oct 1, 2009 at 12:03 am
RE: Doug @ 22 –
Here’s some ” middle ground.” Wait until next spring, then re-evaluate. There aren’t going to be any price hikes between now and next March, so you won’t miss out on any big gains by waiting. You will, however, have better information by then about the economy and what is likely to happen next. Look, but wait. You have nothing to lose, but may save yourself from disaster.
David Losh » Oct 1, 2009 at 7:11 am
The best place to start is the location. I personally like North East Seattle. There again I like South Seattle away from the air port flight patterns, but my wife does not. There are pockets of North West Seattle I like around Broadview. Green Lake and Wallingford are more challenging, Capital Hill and Queen Ann have pockets.
The location is up to you, but pick an area to search.
Drive the area at different times and pay attention to what’s going on. See if people are walking around, or if there is remodeling, cafés are doing business, and schools. Schools sell properties, your biggest buyer pool for resale is a family with children.
This is the hard part and I have to agree it’s difficult, but go to Sunday Open houses and say you have an agent you are looking with, you have signed a buyer’s agreement with that agent. You just happened on the Open House on your way to some place, and ask why it is priced so high. You’ll get all the information you need.
Go to some foreclosure classes, but be careful. Go to a first time home buyers class, but just listen. Get pre approved for a loan.
Now you should be ready to look.
I now see the dilemma that people face when looking for properties. There are no search sites for you. All the information is neatly controlled by people trying to sell you something. I have tried to use a variety of search sites and they are all filtered and framed.
With very great reluctance I would say John L Scott, redfin, and Zillow are the place to find properties to drive by.
I become familiar with a neighborhood. When I buy I buy within a mile of where I would want to be.
When it comes time to buy I would interview Real Estate agents in the location. I have never really thought about it until reading this site but I know lots of agents and have never made a purchase without talking with several. I always ask if I’m having a mind fart about a property I like. I really need a second pair of eyes, because I buy on feeling. I’m usually right, but there have been some places I was all jazzed about that I look at now that were real dogs. A second pair of eyes, in a professional capacity, helps.
The system is unfortunately set up where you need access to Real Estate industry information to buy a deal.
My criteria to buy is if I can sell it for a profit the day I close. That means about 15% below market value. Today that would need to be 20% below market value of closed sales. Now you are in a very hard process of just making offers. Most professionals look at stuff that has been on the market a long time. Find out why the property hasn’t sold. Make the offer based on repair costs, people respond to that better because it’s subjective.
Probably more information than you ever needed but take your time.
Rojo » Oct 1, 2009 at 9:00 am
By buystocks @ 25:
Are you really smoking something? 60% off current values? Love the entertainment value of this site.
Waiting might be a good idea but 60% off current values worst case? How about Seattle gets wiped out from an Earthquake followed by a tsunami. Isn’t that another worst case?
Amazing to continue to see crazy talk!
Hey I also heard the world is coming to an end in 2012. Whats the point of saving your downpayment if all of us are getting vaporized in less than 3 years.
Lol
Rojo » Oct 1, 2009 at 9:05 am
By David Losh @ 27:
Here we go, another one!
When in the history of real estate could you ever buy something that you could buy and turn around and sell for profit with any change or enhancement? It might be possible for investers who buy in bulk – like a 1000 houses from a back at 25 cents to a dollar and then make profit on 500 out of these 1000 houses.
For normal people, I don’t see how this could be done!
Back to bascic » Oct 1, 2009 at 9:09 am
Today’s risk is much lower than 2007. Seattle is down 22% from 2007 peak. It may go down if the economy situation get worse (lf we had a double recession next year). Or it may stay relatively flat if the GDP growth improves next year. We will see Fed raise interest from near zero gradually. Bank start loosing credit and people seeing value and buying. Don’t be suprise to see your like being outbid buy one of bubbleheads. Cause out of 1000 property, there may be 100 which located in desirable area and priced fairly. The price improve will be uneven. Every house is unique. Buy what you like to live for 10 years or more. Don’t buy just on price. Housing is one kind of consuming goods like car. If you like it and price sounds right and most import you can afford, buy it.
AMS » Oct 1, 2009 at 9:09 am
RE: Rojo @ 29 – The young economist looks down and sees a $20 bill on the street and says, “Hey, look a twenty-dollar bill!”
Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”
AMS » Oct 1, 2009 at 9:12 am
RE: Back to bascic @ 30 – I heard this same sort of speak about the Detroit market, GM stock, and several other things.
Here is what we know. You can lose the full purchase price. If the purchase price is 22% less, then you can only lose 78% of the former purchase price.
Yes, I know a guy who rode GM stock from about $70 down to essentially zero. He kept saying, “It cannot go down any more.”
Back to bascic » Oct 1, 2009 at 9:32 am
By AMS @ 32:
Some bubblehead still think house as a trade tool like stock which could flip in second to make profit. No wonder Seattle housing inflated so much that average Joe couldn’t afford it in 2007. House should be treated as 1/2 shelter ans 1/2 wealthy builder but not a stock. I see old couples purchase and live in a house for 20 years and sell for retirement. I also see people flip and turning quick cash. All sorts of people. Did these people creat any value? Nothing. It’ too easy to get rich quick buy clipping your mouse. But the damage to the society is huge.
Rojo » Oct 1, 2009 at 9:35 am
By AMS @ 31:
Agreed, you could stumble upon a property priced lower than current market value but it is not easy – it is not easy at all! Why would somebody sell 20% below current market value that is already 20-30% off depending on the area. The problem here is that even bank owned properties are not selling that low either. Highly distressed proporties are selling at around 30-35% off peak. Now, I am not sure about others, I would not want to buy a highly distressed property for another 5% off. I don’t and want to benefit from other people’s misfortunes and move into a house where there was unhappiness, broken dreams and maybe intentional sabotage.
The key is finding something you really like, can easily afford it, plan to live there 7-10years. Everything else, especially thinking about like like an investment should be secondary. If you can’t stomach that, rent or stay put for some time till you see whats going on.
Prices going down further is a possibility but going down to 20-30% of peak prices is just crazy talk. Remember, Seattle might not be special but it is still a very desirable area to live in with strong influx of people. While renting my condo, I alone met 4 couples who were relocating to Seattle from other parts of country.
AMS » Oct 1, 2009 at 9:36 am
RE: Back to bascic @ 33 – Damage to society because someone made a buck on a house?
I do know there are people who blame sellers for selling at a too high of price. There are those who blame the lenders. There is plenty of ‘blame’ to go around.
In any event, when you buy a house, it could go down in value.
AMS » Oct 1, 2009 at 9:37 am
RE: Rojo @ 34 – There are not many $20 bills on the sidewalk, but when you find one, it’s a great deal.
(I should note, however, that there is a bit of prospecting, as some things that look like $20 bills might be fake, but the overall gain is probably positive. Bill Gates cannot pickup $20 bills and net out ahead.)
Back to bascic » Oct 1, 2009 at 9:49 am
RE: AMS @ 35 –
People trade everything nowadays. Oil price$150, Dow 30000 2005. The maket is controlled not by suppply/demand but by a few traders. Damage or no damage. Ask people bought in 2007 who truly want to live in the house. Or ask a trader who merely want to load and unload one stock for profit. You will get two different answer. At least, I did see the bubble and never buy into the bubble economy. However, I do see value pop up in a recession economy and want to take advantage of this buy opportunity if there is a one.
Scott Weitz » Oct 1, 2009 at 9:53 am
RE: Doug @ 24 –
Doug,
If you buy, it should be out the bank owned inventory. The market has not hit a bottom yet, especially in the mid-to-high end….and certainly not in Seattle. All the positive Real Estate news is low end, and the appreciate is the speculators back at it in Arizona, and So. Cal.
AMS » Oct 1, 2009 at 9:55 am
RE: Back to bascic @ 37 – “The maket is controlled not by suppply/demand but by a few traders.”
Depends on the market. I doubt you think this holds in single family housing. Oil and Gas mining, on the other hand, has very few players.
patient » Oct 1, 2009 at 10:03 am
RE: Scott Weitz @ 38 – I thinkt he comment on focusing on bank owned properties is a good one if you can’t wait. Even if you wait bank owned properties are likely to be the better deals for the next years. It would be pretty cool if The Tim could make a post on bank owned properties with some info on prices vs. “normal sales” and the process on how to go about finding and buying them. Either by himself or by a guest writer or a mix. I think it would be an interresting topi for many here.
Scott Weitz » Oct 1, 2009 at 11:22 am
RE: patient @ 40 –
Tim, I’d be willing to do some research/ write an article if you want a post on buying bank owned property.
HappyRenter » Oct 1, 2009 at 11:24 am
I need some advice about the appraisal report. We are just signing all forms for our pre-approval from Homestreet. In one form, they ask us whether we want the appraisal report be mailed three days prior closing or whether we want to waive the three-day requirement and see the report at closing. The lender recommends to waive the three-day requirement and see the appraisal report at the time of closing because it would further delay the closing. Doesn’t the appraisal report help us evaluate whether the property is overpriced and step back in case it is? Or, is it rather unnecessary? Any advice would be greatly appreciated.
AMS » Oct 1, 2009 at 11:40 am
RE: HappyRenter @ 42 – The time to value a home is not at closing.
HappyRenter » Oct 1, 2009 at 11:57 am
RE: AMS @ 43 –
How helpful is such an appraisal report? What is it for?
AMS » Oct 1, 2009 at 12:03 pm
RE: HappyRenter @ 44 – Generally the lender wants to make sure that the property is actually worth something, so a professional goes out and estimates the value.
If the estimate comes in too low, the price needs to be adjusted down, or you need to run away, in my opinion.
If the estimate comes in above your purchase price, then the deal continues.
You should know your estimated value before even getting that far. You already made an offer that was accepted.
JimN » Oct 1, 2009 at 12:14 pm
RE: HappyRenter @ 42 –
The lender’s recommendation is correct. Should you actually be prepared with all the closing documents, appraisal report, etc 3 days prior to the closing; there will be high risk you will run away.
Much better and efficient to have the whole stack thrown at you at closing with little yellow stickies helping you find the exact pages you need to sign and initial.
AMS » Oct 1, 2009 at 12:22 pm
RE: JimN @ 46 – Oh, right. …and don’t read anything. Don’t bring an attorney. The seller and REALTORS do not want this deal to fail. Efficiency is much better than safety!
I always suggest having an attorney to review all the documents. The time to get an attorney is before any agent is selected, much less any offer is made, and this guy is way behind in that regard, in my opinion. This question should go right to his attorney, who probably would want to review everything in advance.
cm » Oct 1, 2009 at 1:00 pm
IMO the appraisal is of very little value, 98% of the time it is at the contract price or within $500. Getting a copy of it is really unimportant other than having something to put in your home buying folder. If the appraisal comes in lower than the contract price, you will have plenty of time to see the report because you will not be closing any time soon. Your loan amount will have to be decreased and your down payment goes up or the purchase price will need to be lowered to match the report. The inspection report is much more important, so you know what the issues may be with the home.
Kary L. Krismer » Oct 1, 2009 at 1:25 pm
RE: cm @ 48 – If the appraisal comes in at the sale price, that likely means that the appraiser was coming in slightly low, and just bumped it up slightly. They have some latitude to do that.
The thing is, if the appraisal comes in low, you’ll likely know about it long before closing. And if it comes in at or above the contract price, there’s really little reason to even look at it, other than curiosity.
Kary L. Krismer » Oct 1, 2009 at 1:28 pm
RE: AMS @ 47 – Judging by the question, I’d guess HappyRenter doesn’t have either an attorney or an agent, or if they do, those people don’t return phone calls.
AMS » Oct 1, 2009 at 1:34 pm
RE: Kary L. Krismer @ 50 – In this “hot” market, all the agents and attorneys are probably so busy that this is low priority…
HappyRenter » Oct 1, 2009 at 2:05 pm
RE: Kary L. Krismer @ 50 –
This is correct. We don’t have an agent, neither an attorny. But we are about to sign the paperwork to get pre-approved for a loan. We have been at open houses but we will not start looking seriously until this spring. Is what we are doing wrong? Should we first get an agent and/or attorny before getting pre-approval?
Kary L. Krismer » Oct 1, 2009 at 2:16 pm
I don’t think you need either before pre-approval, because that doesn’t commit you to anything (that I’m aware of). But if you don’t go with that particular lender, it might cause your credit score to drop a tiny amount when the second lender pulls your credit (I don’t think they’ve fixed that yet, but I’m not certain, and if you’re not doing anything until Spring I doubt there’d be an effect by then).
I thought you were further along–I missed “pre-approval” in your post 42.
Do talk to the lender about what not to do in the interim to maintain your credit score.
AMS » Oct 1, 2009 at 2:20 pm
RE: HappyRenter @ 52 – I personally recommend getting an attorney first. Next I recommend someone who really knows financial analysis (a CFA, for example. I do not recommend anyone who sells any products to you. Cash for time. In other words, someone who can give you an honest assessment of the finance, at which most attorneys are not as adept. This should not cost much, especially when considering the size of the transaction. The financial advisor can also answer your questions about loan structures, capital finance, and so on.)
There are many others who have completed many transactions without employing professional help. That’s just not my style.
I’ll leave you with this:
Did you know that “no closing costs, no point loans” can actually cost you considerably more? This gets to the wholesale rate sheet and the way the debt is sold. Essentially the higher interest rate they sell you, the more they get paid. There are times when paying a small amount at closing can save you big over not paying anything at the closing. YOUR finance guy can help you with this. Do you think the lender is going to explain how they make more money selling you certain deals?
AMS » Oct 1, 2009 at 2:28 pm
RE: HappyRenter @ 52 – One last thing:
Not all lenders are bad. Some are quite honest. Many in the industry got beat down by “no closing costs” deals, as people were refinancing so soon.
I have asked this question time and time again:
I owe $500,000. Interest rates come down, so I refinance at a lower rate (no closing costs). Now my payments are lower, and the mortgage broker made money.
A year later interest rates come down, so I refinance at a lower rate (no closing costs). Now my payments are lower, and the mortgage broker made money.
A year later interest rates come down, so I refinance at a lower rate (no closing costs). Now my payments are lower, and the mortgage broker made money.
How did any of this add value to my property and where did the money come from to pay that mortgage broker?
(Note: I do not actually owe money on any property, nor did I play the game.)
HappyRenter » Oct 1, 2009 at 2:31 pm
Thank you Kary and AMS for your answers. It starts becoming more clear now. We will probably waive the three-day requirement. Also, we will consider getting an attorny and possibly a CFA. We have been at a homebuying seminar offered by Homestreet. Maybe we should also get independent opinions by people who are not affiliated to sellers or lenders.
Are there in Seattle any homebuying seminars offered by institutions which are not affiliated to lenders or the real estate market? What I’m doing right now is to read about the market to try to understand myself as much as possible.
AMS » Oct 1, 2009 at 2:34 pm
RE: HappyRenter @ 56 – “What I’m doing right now is to read about the market to try to understand myself as much as possible. ”
You are doing the right thing. Continue on this path until you are very knowledgeable with the situation.
My strategy is to have an attorney for legal questions.
A finance person for finance questions.
(These are paid for time)
A buyer’s agent (REALTOR type) for house hunting, but review with others above.
Talk to lenders about money, but review with the others above.
“Send Lawyers, Guns and Money” -Zevon
JimN » Oct 1, 2009 at 2:53 pm
“The lender recommends to waive the three-day requirement and see the appraisal report at the time of closing because it would further delay the closing.”
The importance of the appraisal is not the issue. What I need some clarification on is the “threat” of delay. Why would having the document in advance delay the closing? Or, if it’s a matter of days, why can’t this be planned out? As a layperson, I guess it really rubs me the wrong way if a lender would make this statement.
AMS » Oct 1, 2009 at 2:56 pm
RE: JimN @ 58 – It can be planned, but clearly if you need the documents 365 days in advance there would be a delay.
If you take a tight schedule and add 3 days, then there is a 3 day delay. I agree that 3 days is not significant, but if you were the lender, would you want to be required to provide a 3 day notice?
Whose interest does the lender have in mind?
Of course the lender sees it as unnecessary and a delay…
JimN » Oct 1, 2009 at 3:37 pm
RE: AMS @ 59 –
AMS,
It’s my understanding that there are requirements for certain documents to be delivered before closing. My point is, unlike happy renter, I would not waive those requirements.
Of course, I wouldn’t schedule a closing so tightly that I couldn’t delay.
AMS » Oct 1, 2009 at 3:39 pm
RE: JimN @ 60 – I agree 100% with your philosophy, but I reserve my option to consult with my attorney before making a final decision.
JimN » Oct 1, 2009 at 3:45 pm
RE: AMS @ 61 –
Agreed.
Actually, I’m confused why this even is an issue at a “pre-approval.” The last time I got pre-approved, I didn’t need to sign any forms, let alone sign forms to waive certain requirements.
AMS » Oct 1, 2009 at 3:59 pm
RE: JimN @ 62 – This illustrates why I like to have my attorney by my side.
HappyRenter » Oct 1, 2009 at 4:21 pm
RE: JimN @ 62 –
It seems that they require this now. At least, they require it from us. I asked the lender what the disadvantages are if the closing is delayed. The answer is:
The Seller may need the closing to occur on time because he is
buying another home for which he needs the proceeds from the sale.
You may have a lock in place that is going to expire, and it will
cost more money to extend the lock.
Whenever the closing date changes, there has to be a legal
document prepared and signed by all Buyers and Sellers showing agreement to the changed terms of the contract.
But I agree with JimN. I don’t see why having the appraisal mailed (or e-mailed) three days before closing would introduce a big delay.
AMS » Oct 1, 2009 at 4:24 pm
RE: HappyRenter @ 64 – I think you could waive this at any later point in time, but I am not an attorney. In other words, if you run into a situation where the closing needs to be moved up, then the waiver can be made, on the advice of your attorney, of course.
David Losh » Oct 1, 2009 at 5:10 pm
RE: Rojo @ 29 –
What’s your criteria for a home purchase?
JimN » Oct 1, 2009 at 6:28 pm
RE: HappyRenter @ 64 –
Happy renter. Just curious, is this for a existing sfh, or new. How did you pick homestreet for the pre-approval?
The last time I did my pre-approval, I just walked into my local credit union, provided some documentation and was done (Not obligated to use them when I ultimately shopped for the mortgage, ie. after signed contract.)
Rojo » Oct 1, 2009 at 9:04 pm
By David Losh @ 66:
i could spend the time to write it down but I don’t think it is worth it because it is based on each individual’s need and financial condition.
All I can say is, buy something you like and will live in for 5-10 years, something you can clearly afford and that too on a 15 year note. Don’t have to get a 15 year note but should have the ability to pay in 15 years.
As for declines in the current market value, it could happen or it could not. I wouldn’t worry about it too much for the long haul. I don’t have a crystal ball and neither do people predicting a free fall. With the high diserability of Seattle area, I doubt that would happen.
I have a friend who wanted to buy a house close to where we live. The builder chased the market down by almost 200K. My friend really liked the house but kept delaying it because he was expecting it to keep dropping. Last month the house suddenly sold for the full list price after the latest drop. He had set his top at 5K below where this house sold. It would have been perfect for his family but for 5K he lost because of general fear. Now, he will start looking again but I don’t think he will wait too long to make an offer this time. He could have afforded the house at the peak, now with 200K off, he can afford that much more. There are lots of people just sitting on the fence waiting but as properties go off the market, more buyers will keep coming knowing that good houses in good locations are starting to go quickly. For him, he knew that going down by another 5-15% is not a big deal because he plans to live in it for 10 years. It was the mentality of getting the absolute minimum price that got him. I think thats whats going on with a lot of people. I know atleast 4 other people in my circle who are waiting to buy. Two of them even tried getting into a short sale but gave up because of the delays, frustrating experience.
anyway, I rambled.
David Losh » Oct 1, 2009 at 9:35 pm
RE: Rojo @ 68 –
You are rambling. I buy below market, no matter what the market.
The value of a house is what it will rent for. If you carry a mortgage the rent should cover the mortgage payment with a 0% down 10% loan.
Nothing else makes any sense unless you can sell it for a profit.
I really like the fundamentals of Real Estate. I like that term. These are the fundamentals.
If you want to pay more because it’s perfect for the family, I think that’s great. You want to and can pay it off in 15 years that is excellent, I encourage and applaud that. Owning property free and clear is the best way for a property to be an asset.
Rojo » Oct 1, 2009 at 9:57 pm
By David Losh @ 69:
I have one word for you – slumlord!
0% down, 10% interest rate? When was the last time this could be done? I am too young to know!
Let us say one exists –
3Br, renting for 1500, 600 insurance, 3000 taxes – Price would need to be 137K.
2Br renting for 1000, 500 insurance, 2000 taxes – Price would need to be 90K
Are you really waiting for prices to go down that far? Maybe a trailer in snohomish but hey, nobody would pay $1000 for a two bedroom there.
GOOD LUCK DUDE!!!
Crazy talk continues!!
what goes up must come down » Oct 1, 2009 at 11:59 pm
Rojo,
You say people talk crazy — using your logic your friend should have bought that house before any price drops
” have a friend who wanted to buy a house close to where we live. The builder chased the market down by almost 200K. My friend really liked the house but kept delaying it because he was expecting it to keep dropping. Last month the house suddenly sold for the full list price after the latest drop. ” suddenly sold for the full list price? yeah after being reduced 200k lucky your friend didn’t listen to you or he would have bought when it was 200K more expensive.
Face it your where in the camp that never thought RE prices in seattle would drop — because it is magical — Hmmm, I guess you were WRONG.
Rojo » Oct 2, 2009 at 8:54 am
By what goes up must come down @ 71:
Read whatever you want to read – I did not imply he should have bought at the peak. I was saying that he should have bought it at the second last price drop that was only 10K higher and made an offer 10K lower.
He is in a tough spot with 3 kids and a dog all living in a small 2br apartment with his wife going crazy. Neither am I saying he won’t find anything else. They is in the 300K combined income bracket but the desire to get the absolute minimum price is driving him crazy and putting undue strain on his family and his marriage – is it worth it? Thats what I was trying to say. Life is too short to worry about money so much, especially when you make a a decent living.
You don’t know me, so don’t make any assumptions about me!
I wonder which campt are you in – loser job, loser education, wishing could afford a house, knowing you can afford one only if you wish hard enough to have prices fall another 50%!
What I said above was not nice but I only said it make a point – don’t make assumptions about anyone you don’t know about.
Dave Anderson » Oct 2, 2009 at 10:48 am
The Case Schiller nubmers continue to point to the conclusion that the price changes we’re seeing are driven by the First-time home buyers tax credit.
- Seattle by tier shows the “high” teir still declining in price while the low-and-mid tiers increase (note “high” tier purchases are less likely to qualify for the tax credit).
- Decline from Peak by City shows that for virtually all cities, the index reversed from month-over-month declines to month-over-month increases which continue through the latest data.
The First-time home buyers tax credit expires in December. Unless the credit has permanently changed the psychology of the housing market, we can expect prices to resume falling in all markets including Seattle.
When we finally hit a real market “bottom” in the future, it will not one moment where all cities simultaneously reverse. Prices are based on local affordability and will bottom independently at different times, with Seattle likely to bottom later.
HappyRenter » Oct 2, 2009 at 12:13 pm
By JimN @ 67:
Hi JimN,
Sorry, I did not check back yesterday any more. This pre-approval is not for any home in particular. We just got pre-approved to borrow a specific amount of money given the down payment we are willing to make, our salaries and credit scores. Homestreet has a partnership with the UW, that’s why we checked it out first. We will shop for other lenders, too. The goal of this pre-approval was to actually figure out what we would qualify for.
I think that rules have changed from the time you got a pre-approval. For example, I found this article about the three-day requirement:
http://www.docmagic.com/compliance/wizard/2009/june-2009/hvcc-update
buystocks » Oct 2, 2009 at 1:07 pm
By Rojo @ 28:
Try this exercise then, Rojo:
What do you consider the worst case scenario?
What did you consider the worst case scenario one year ago and two years ago?
What would you consider the worst case scenario in one year if housing has dropped another 10%?
I’m guessing you would of considered somebody “crazy” if they described the current state of the housing market as the worst case scenario two years ago.
My main point is don’t try to predict and speculate on a large leveraged asset, such as a house. I consider buying a house analogous to purchasing stocks on margin; yet common sense tells most people that buying stocks on margin is very risky, but common sense tells most people that buying a house is safe; there is a huge contradiction here that has financially ruined many people over last several years. That’s why it’s important to figure out the costs of both scenarios (housing plummets vs housing skyrockets), and ensure you feel good about the risks. Plus, your arrogance is not an argument, its just annoying. Try to formulate something besides simply belittling everybody and stating how crazy everybody is.
JimN » Oct 2, 2009 at 1:58 pm
RE: HappyRenter @ 74 –
Thanks. I’m more confused now. I guess I’ll take AMS’ advice and ask a lawyer before I sign any type of waiver. Luckily my timeframe for buying is 1-3 years so I have time to figure it out.
David Losh » Oct 2, 2009 at 3:03 pm
RE: Rojo @ 70 –
Calm down, it’s OK. Yes I do expect prices to drop a lot to match value.
These are criteria I use to buy property. I have not bought a property since 2006 and yes paid 30% below market analysis based on work that needed to be done.
I do not hold properties.
People today are buying and selling properties for profit. I’m not in the game and it has cost me plenty.
Real Estate is a commodity of housing units. You can make good deals in any market. On the way up all was golden, but I am 56 and have been dealing with properties for over 25 years. For 10 years before that I worked for people who bought and sold properties.
There have been down markets before but nothing like we have today. Today you can make very good deals. I’m, get this, morally opposed to the market place we have. Lot’s of people have gotten hurt while banks make extreme profits. It makes me sick.
That said, if you are inclined, and it’s for your family, you have the same opportunites as any one else.
Rojo » Oct 2, 2009 at 3:07 pm
By buystocks @ 75:
Not everybody – just a few and they have all found a home