Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

13 responses to “Foreclosures Keep Falling from Year-Ago Levels”

  1. Kary L. Krismer

    Per an article I read in the San Fran Chronicle, there are about 15 states with rising YOY rates, and they are all states with judicial foreclosure systems.

    I wonder if those states will adopt non-judicial foreclosure systems? One huge benefit is it costs the state a lot less money if you don’t have them go through the judicial system.

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  2. ARDELL

    RE: Kary L. Krismer @ 1

    They can’t simply decide to move to non-judicial, as generally they did not reserve the right to do so via a Deed of Trust signed at time of purchase. It’s optional to go either way here…but not in States that use Judicial as the primary.

    I don’t think the choice is made from the standpoint of lenders vs State residents, and in that regard the citizenry is better served via the Judicial process vs non-judicial. I don’t see either changing in the next decade.

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  3. Kary L. Krismer

    RE: ARDELL @ 2 – Obviously it would be just something for future transactions, because the existing ones are presumably mortgage documents and not deeds of trust. But with people selling and refinancing it wouldn’t be that long before 90% of the debt was secured via a deed of trust.

    And I would strongly disagree with you about which favors the citizenry. The main advantage to the deed of trust system is that typically there is not a deficiency. True you could have a judicial system without a deficiency and a non-judicial system with one, but I was contemplating something similar to Washington’s system. And I would guess that each judicial foreclosure probably costs the state at least $2,000, and more if contested, so the savings to the state would be considerable.

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  4. sam

    Hey Ardell/Kary,

    As you guys have tons of experience, When do you see things coming back to normal? By normal, a balanced market for buyers and sellers, 4 months of inventory etc..Real estate seems like stock market to me now. So much volatility.

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  5. ARDELL

    RE: sam @ 4

    Sam,

    I work in some popular areas like near Microsoft and Google offices on both The Eastside and Seattle.

    Honestly I think I’ll be six feet under before we see a true balanced market in any of those areas in the most popular of price ranges and popular homes. I can find a year supply in high end Kirkland and none in the same price point that represents “starter home” in Clyde Hill.

    A true balanced market is 6 months of inventory and not 4, and I’m pretty sure I’ll be dead by the time the majority of homes fall into the definition of “a balanced market” in the areas where I work. If I’m wrong about that I could always just kill myself to make myself right. LOL!

    Some people are just looking for a needle in a haystack, like a home in perfect condition or new with a decent sized yard within walking distance to…most anything for $550,000 or less. You need to test that. What are you looking for and where? The answer would be different for different areas and price points. I think some of the Islands have a balanced market now…at least one of them. But I don’t plan to live or work there.

    I see some balance in markets in Renton, and clearly homes for sale where it is not a seller’s market for that neighborhood and those homes for sale. Wishing for a County-wide balanced market…it’s kind of an odd thing to wish for unless you would live anywhere in the County where there happens to be a balanced market today.

    Some people waiting for “better inventory” are actually waiting for a house that doesn’t exist, and many are starting to face that fact in 2014. They aren’t going to buy what they have been waiting for…they are going to buy something completely different than what they were waiting for.

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  6. mike

    Looks like Eric may be waiting a while before he can pick up a cheap foreclosure.

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  7. sam

    I am looking for a home on the eastside, particularly in Issaquah. The inventory situation is beyond crazy and as you said the 500K market is ridiculously competitive. I did see a slow down last fall between 10/13-12/13 when interest rates hit 4.5%. Just could not find the house that we liked. I want to test the market and see when the rates hit 5%, which seems to be likely this summer/fall. I don’t see inventory going up with this level of demand unless there is a triggering event. I was at an open house and people from canada are visiting the east side to buy investment homes. Seriously, texas and atlanta are not bad options where the salary is not half as the current salary, but homes are twice large and 0.5x the price.

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  8. wreckingbull

    RE: mike @ 6 – No worries, bro, he has FAT STACKS OF CASH(™).

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  9. ARDELL

    RE: sam @ 7

    One of my clients who has been in the market for two years did get something that listed right after Super Bowl Sunday. There were more listings than usual right after the Super Bowl, as there was a bit of a backlog as people “waited until after the Super Bowl”. That in Sammamish, and there were a few good ones in Fremont-Ballard as well…more than usual.

    A lot of good sized homes in Issaquah tend to sell during a short period of time, and if you miss that time frame, you miss the boat. There are always urgent needs like a job transfer here and there. But generally people in good school areas like to list 30 to 45 days before school ends and new buyers like to be in before school starts. That’s a typical “suburban home” cycle, especially for the larger 4 bedroom homes.

    Neighborhoods like Brookside Estates in Issaquah took a big jump last year and the sellers were pricing off the pendings and a lot of buyers underbid because they were pricing off the solds. Not sure if we’ll see that again this year. I’m thinking not by as much as last year, especially before the rates moved.

    Multiple offers on the Eastside (some exceptions in part of Bellevue) are not as stressful as popular neighborhoods in Seattle. You still need to face the fact that there will likely be at least one to 4 other bidders, but not nearly as stressful as strong Seattle neighborhoods and parts of 98004.

    There’s been a serious famine of homes for sale in Kirkland near Downtown or Metropolitan Market. Could just be the school cycle thing…but the first few to hit the market may end up with 7/9 vs 2/5 offers for that reason.

    If you can really wait until 2015…maybe you don’t need to buy a house at all, considering you seem to have been looking for quite awhile. Most people can find a home in 6 mos if those 6 mos are from 1/1 to 6/30. Not so much when those 6 months are from 7/1 to 12/31. It’s just the wrong cycle to have good choices. That’s pretty much always been true IF you are looking in neighborhoods with top ranked schools, which my clients usually are.

    If you miss that window by not liking anything…you usually have to wait until next season. That is why we have “Spring Bump”.

    If the change from 3.5% to 4.5% didn’t give you the result you are seeking last year, I wouldn’t bet that 4.5% to 5% will either. In fact if it hits 5% for even a day and then drops back to 4.875% the impact will be the opposite of what you are proposing might happen.

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  10. whatsmyname

    RE: ARDELL @ 5
    We have been waiting for about 3,000 sf in just your area: Tudor in the front, mid-century in the back, and rooftop deck. No busy streets. We have $560,000 to spend. Before you use your realitor speak to suggest we are unrealistic, let me just tell you that we are willing to compromise on the deck color and swimming beach, (although the boat dock is non-negotiable). I might even step back from my south by southwest exposure requirement. Just tell your sellers that $560,000 is a lot of money to me.

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  11. ARDELL

    RE: whatsmyname @ 10

    Sorry can’t help you since you said “your sellers”. Can’t help you as the buyer if the sellers are already my clients for your dream house. You need to hire someone else, preferably a man. :)

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  12. whatsmyname

    By ARDELL @ 11:

    RE: whatsmyname @ 10

    Can’t help you as the buyer if the sellers are already my clients for your dream house. :)

    Aha! I knew that house was out there.

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  13. Kary L. Krismer

    By sam @ 4:

    Hey Ardell/Kary,

    As you guys have tons of experience, When do you see things coming back to normal? By normal, a balanced market for buyers and sellers, 4 months of inventory etc..Real estate seems like stock market to me now. So much volatility.

    That’s impossible to predict because you’d be predicting how many people are going to decide to sell vs. how many people will decide to buy over a period of time. Recently what we’ve been seeing is pent-up buyer demand overwhelming the market. Will the same thing happen with pent-up seller supply? Probably, because for example, people retire. But when that will hit, and when it will get things back to “normal” is unclear. I don’t recall anyone predicting the inventory levels at the beginning of 2014 would look like 2013, and if they did, they were just lucky (and also wrong if they were talking about Snohomish County).

    But also don’t assume that will be “better” than now if you’re a buyer. Someone here a year or two ago said something to the effect “the bottom isn’t as fun as we thought it would be.” The same could be true of betting back to a “normal” amount of inventory. Without predicting a particular situation, perhaps interest rates will have gone up more than prices dropped, or maybe interest rates and prices will have both gone up. Finding the right property in this market can be challenging, but that should be the challenge for your agent.

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