Monthly Newsletter September 1, 2017

3 Reasons Why We Are Not Headed Towards Another Real Estate Bubble

I get asked this question often, and I can understand why. With the 2008 Great Recession not too far back in our rear-view mirror it is understandable that folks don’t want history to repeat itself, as that was a very painful time for many. Also, price appreciation has been rapid across the country, but especially in our region. The large price gains might seem familiar to the gains of the previous up market of 2004-2007, but the environment is much different, and that is why we are not headed toward a housing collapse.

Lending Requirements
As the graph shows, lending requirements are much more stringent now than what they were prior to the fall of the housing market.

Previous lending practices allowed people to get into homes with risky debt-to-income ratios, low credit scores and undocumented incomes. They called this sub-prime lending. A large part of why the housing bubble burst 10 years ago was due to people getting into mortgages they were not equipped to handle, which lend to the eventual fall of sub-prime lending. Currently, the average credit score over the last 12 months according to Ellie Mae was 724. During the days of sub-prime lending people were funding loans with scores as low as 560! This, coupled with many zero-down loan programs and the risky terms mentioned above left many new homeowners with little to no equity. When you have little or no equity it very easy to just walk away.


The graph above shows the percentage of homes in our state with significant equity (20% or more) according to CoreLogic. Today many homeowners, especially in our region are making large down payments to begin with. Believe me, when reviewing multiple offers on a house, the size of down payment matters – hence many buyers landing homes are making large down payments. Unlike the market prior to the crash, when people have high equity levels they are not likely to abandon their home or miss payments.

Inventory Levels & Our Job Market
The biggest challenge in our market has been low inventory levels and high housing demand. It’s simply the concept of supply and demand. Our thriving job market has afforded folks already in our area the ability to make moves, and it is bringing people into our area from other parts of the country. Washington State’s net in-migration is 43% higher than it was 10 years ago. This has created increased demand, especially for homes closer to job centers resulting is shorter commutes. When you have increased demand and not enough homes to absorb the buyers, prices go up. Over the last three years we have easily seen a 10% increase in prices year-over-year. That is above the norm and should slow down as inventory increases. As inventory increases we anticipate a leveling out of appreciation rates to historical norms of 3-4% annually, but not decreasing home values like the 2008-2010 crash.

I understand that the recent increase in home prices has been big and that it might remind you of the previous up market before the crash. I hope that digging into the topics above has shed some light on how it is different. According to Matthew Gardner, Windermere’s Chief Economist and nationally sought after expert on all things real estate, buyers should not wait this market out, due to future price appreciation and today’s historically low interest rates. Check out his latest vlog (video blog) that addresses this topic.

As always, it is my goal to help keep my clients informed and empower strong decisions. Please let me know if I can answer any questions or help you or anyone you know with their real estate needs.

 

Mill CreekNeighborhood Profiles August 17, 2017

Mill Creek

Welcome to Mill Creek! 

Located in Snohomish County and just about 20 miles northeast of Seattle, Mill Creek is a smaller community brimming with excellent amenities to take advantage of. Originally built around a country club and golf course that you can still enjoy today, Mill Creek offers a long list of city conveniences whether you’re looking for gorgeous outdoor opportunities or plenty of restaurants, shops, and activities close by.

In addition to the pristine Mill Creek Country Club and Golf Course, Mill Creek is brimming with ways to stay active. A long list of parks and an incredible trail system offers picturesque settings to enjoy, and parks and the incredible sports center will keep the whole family busy! Additionally, the Mill Creek Town Center is another top destination whether you want to have a delicious dinner out or spend the day shopping!

“Mill Creek officially incorporated on August 30th, 1983 and was built around the Mill Creek Country Club and its golf course. It currently has a population of just under 20,000 people. It is full of hiking/jogging trails throughout the wooded areas. The Country Club is a private club that has a gem of a golf course that people love to play!” –Travis D


Getting Out & About

“There are some nice walking trails near the downtown area and around village green drive, many parks including a skateboard park. The towncenter is a fun place to walk around, go for coffee, dessert or dinner.” -Tonya T

“Central Market grocery store has the best selection of fresh fruit, wine, seafood, meats, made to order sandwiches, fresh sliced deli meats and cheeses, large selection of organic foods, sushi and more. Grab a bite to eat and enjoy the outdoor courtyard or stop to shop for a special dinner. This store has has it all.” -Heather P

“There is such a broad array of restaurants to choose from when meeting up with friends & clients. Something for everyone!” -Tonya T

“I love the convenience and the downtown feel of the Mill Creek Town Center! I can grab my coffee, get a manicure, grocery shop, and run other errands all in the same great spot!” -Ginna D

“One thing I also love about Mill Creek is all the doctors, walk in clinics and dentists that are in town. Super convenient to have so many health providers in close proximity.” -Jen B

“Miles and miles of walking trails linking parks all over Mill Creek is one of my favorite features.” -Jen B


Commuting from Mill Creek

Located just minutes from Interstate-5, Mill Creek is nestled in between Seattle and Everett. Mill Creek to Downtown Seattle is approximately 24 miles, while Mill Creek to Everett is just about 10 miles.


Homes in Mill Creek

“[Mill Creek is home to] nice planned single family and condo communities ranging from $500s and up in varying styles and ages.” -Tonya T

Monthly Newsletter June 12, 2017

You’d Like to Sell Your Home, but Where to Next, and How?

How to sell and then buyHomeowners across our region are enjoying very healthy equity levels due to an upswing in the real estate market over the last five years. In fact, the median price in King County is up 50% over the last five years and up 47% in Snohomish County. This growth in equity has given homeowners the exciting option to sell their home for a high price and move on to their next chapter, such as a move-up, down-size or second home. This price growth is great news and provides many opportunities, however we have also faced some challenges in how to make these transitions.

Our biggest challenge in the marketplace right now is inventory levels; sometimes requiring a buyer to compete in multiple offers for their next home. Currently King County sits at 0.7 months of inventory and 0.8 in Snohomish. Historically, buyers that are also sellers would commonly secure a new home contingent on the sale of their current home. This means the seller of the new home they are buying would give them a month or so to get their current house sold in order to buy theirs. Well in this market, that is only rarely an option. So, the million-dollar question is this: how does one who has gained so much equity, now itching to get that bigger house, different location, or perfect rambler for settling into retirement, make this transition without having to move twice? We need to get creative and have a strategy. Two options that I have recently found to be successful, are negotiating a rent-back for my sellers or using the Windermere Bridge Loan program.

First, negotiating a rent-back has become a great option for someone who needs to first sell their current home in order to buy. The way it works is we put their home on the market, price it competitively to create demand, and ask for a rent-back as one of the preferred terms. If this rent-back is successfully negotiated, then the seller closes on their home and collects their funds, but gets to stay in the house anywhere from 30-60 days. This enables the seller, who is now a buyer, to have their cash in-hand, time to find a new house, get it under contract and close the sale when their rent-back is ending. This eliminates the need to move twice. There is a bit of calculated risk in this plan, but I’ve seen it work multiple times, always with a plan B ready just in case. Rarely has plan B needed to be executed, and often times we’ve even been able to pay little to no rent during this time.

The second option is the Windermere Bridge Loan program. This is an amazing tool for homeowners that own their homes free and clear, or who have paid down their debt quite a bit. This is a low-cost alternative to pull the equity out of one’s house prior to selling it in order to make a non-contingent offer. The way it works is we take the market value of the house the homeowner current lives in, established by a comparative market analysis that I complete and is signed off by my broker. We then take 65% of that value and subtract any debt owed, and that is the maximum amount the homeowner can borrow for their next down payment. They can then make a non-contingent offer on a new home. What is really great about this, is that it doesn’t require an appraisal (like a HELOC does), and these can easily be turned around in 3-5 business days. This tool provides the opportunity to quickly and inexpensively pull your equity out, be competitive, and eliminates the double move.

The fees associated with this program are a 1% loan fee on the equity that is pulled, a title report, and interest that is incurred between the loan funding and being paid off once the subject home is sold. That interest is conveniently wrapped up in the closing costs when they close the sale of their home, eliminating the need to make monthly interest payments. In a strategy that is somewhat mind blowing, we can sometimes use these bridge loans and never have to actually fund them. For example, if we secure a property non-contingent with the bridge loan and immediately get the subject home on the market, we can often secure a sale with a simultaneous closing, and never have to fund the loan. This eliminates the loan fee, interest, and the need to carry two mortgages.

If you are excited about equity levels and today’s low interest rates and have thought about making that move you’ve been waiting for, but have been fearful of how to do it all – I can help. These two options, along with great attention to detail, hand-holding, and careful planning have helped many people make these exciting transitions. It is my goal to help keep my clients informed and empower strong decisions. Please contact me if you would like further information on how this might work for you or someone you know.