Archive for February 23, 2012

National Absorption Rates.

Last night on PBS Ch. 9, the News Business Report reported that national absorption rates are currently at a level of 6.1 months.  Six months of inventory is smack dab in the middle of what experts consider a healthy environment, where neither sellers nor buyers have much leverage over one another.  (for more info on absorption rates, see “Is This a Buyer’s Market?”)

However, unless you are considering buying ANY type of residential property, at ANY location across the country, these numbers may not mean anything to you.  You will definitely want to take a closer look at your exact situation, including area, property type, price point, etc.  For instance, if you were considering buying a 2 bedroom, 1 bath, single family residence in North Seattle, you would find that we are at about 2 months of available inventory.  This basically means that at least in this demographic, we are seeing quite a seller’s market.

Looking at statistics like this may help you decide whether or not it is a good time to enter the housing market.  If you decide that it is a good time to buy, these stats can also help you decide how to proceed.  If you found this info interesting, and would like to acquire more info about todays market, go to our Calendar/Reservations page and sign up for one of our FREE Home Buyer workshops.


Buying a HUD Home.

Buying a HUD property can be a great way to acquire your first home.  A HUD Home is a one to four unit single-family residence, condominium or townhome that has been conveyed to HUD by a lender as a result of foreclosure when the original borrower defaults on an FHA-insured loan. HUD in turn sells the property at “AS IS” market value based on a recent appraisal.  HUD homes vary in price, location, and condition. Some are in move‐in ready condition and others are not.

There are four different types of HUD homes.

  • First an “IN” category defined as an insurable property
  • Second an “IE” category defined as an insurable property with a repair escrow
  • Third an “UI” category defined as an uninsurable property
  • Fourth an “UK” Uninsurable, 203(k) Eligible defined as an uninsurable property but may qualify for an FHA Rehab loan

Depending on which category a property falls into, will dictate the type of financing you can use.

There are three major differences in buying a HUD home.  They are purchase limits, extension fees, and approved realtors.

When writing an offer on a HUD home, any amount you offer above the list price must be paid in cash.  The reasoning behind this is that HUD has an appraisal done on the property before they put it on the market.  So in theory, anything you offer above list, you would be paying above fair market value.  A bank will not lend you more than the property is worth, hence why you have to make up the difference in cash.

Also, for every day you go past your closing date, HUD will charge you a per diem fee.  This daily fee ranges between $10-25/day depending on purchase price, so you’ll want to make sure that the lender you choose for your financing will be able to close in the allotted timeframe.

Lastly, only realtors approved by HUD can assist you in buying a HUD home.  HUD will not work directly with buyers, and only approved realtors with NAID numbers can write a HUD offer for you.

These are only the three biggest differences in buying a HUD home versus a standard property, there are smaller details to be aware of as well.  These may not be a big deal based on your scenario, but it’s still important to be aware of them.  If you’d like to gather more information on the home buying process, go to our Calendar/Reservations page and reserve space in one of our Home Buyer workshops.

If you would like to search for HUD homes, visit


Recovery in the North Seattle Housing Market? pt 2

The next thing to consider in a housing recovery are home values.  How much have they fallen, and may continue to fall?  Also, are we seeing any appreciation?  Most people don’t want to buy a home if they think the value will drop in the near future.

Between 2010 and 2011, median home prices in North Seattle fell about 5.15%.  The west side of the freeway (Ballard, Wallingford, Green Lake, etc.) did a bit better, only losing 3.9%.  The east side of I-5 (Ravenna, Bryant, Maple Leaf, etc.) added more to the overall drop, by falling 6.4%.

A fall in values generally DOES NOT signal a recovery in the housing market.  However, it is important to take this analysis a step further to see how values affect the bigger picture.  Since the crash of 2008, we have seen an overall decrease in home values of nearly 24% in the Greater Seattle area (  Some areas have definitely done better than others, but regardless we have seen mortgage payments become much more affordable over the last four years.

If values continue to drop, and interest rates also stay low (we’re currently at an all time historical low of about 4%), overall mortgage payments will obviously decrease as well.  We are already seeing this situation occur in many neighborhoods including North Seattle, where it costs almost the same on a monthly basis to own a home as it does to rent a similar property.

If prices continue to fall, we will get to a point where it’s actually LESS EXPENSIVE to own, than to rent.  This is typically a benchmark where housing markets start to recover, which is partially why many experts argue that we are already at the bottom.  That being said, there is no definitive guarantee that housing values will not fall another few ticks south.  If you are planning to live in the home long term, a small loss in value in the short term will probably not affect you overall.  But if you only plan to own the home for a short period of time, a few percent decrease in value could be catastrophic, and you may want to reconsider purchasing a home.

Again, this is only one of the factors to consider when buying a home.  There are many angles to consider.  If you’re looking to gather more information before making a decision, go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.


Recovery in the North Seattle Housing Market? pt. 1

Every year the Northwest Multiple Listing System (residential real estate database) publishes year end numbers on active/pending/sold listings in the Seattle area, as well as Washington State as a whole.  Looking at these numbers can give us some insight as to where the Seattle real estate market may be heading.

Between 2010 and 2011, new active residential listings (homes for sale) in North Seattle dropped by 20.57%.  Closed residential transactions in the same area also fell by 2.97%.  So even though total sales fell slightly, levels of new inventory fell by much more, which means that buyers in North Seattle had less to chose from in 2011, than they did in the previous year.  If demand stays relatively stable, but supply decreases by quite a bit, leverage shifts into the hands of the suppliers (sellers).

This scenario generally signals recovery in any giving housing market.  Many economists in the last few months have also started to argue that housing prices have hit bottom, which could be another huge indicator of a housing recovery on the horizon.  (We’ll cover North Seattle housing prices in our next post.)  However, the disclaimer here is that these are only numbers on North Seattle, not the entire nation.  So your specific area could be doing quite differently.

Supply and demand are only a couple of the determining factors to consider when buying a home.  Other things that come into play are interest rates, housing affordability vs. rental rates, job stability, how long you plan to stay in the home, etc.  If you’re a first time home buyer in the greater Seattle area and would like to gather more information about buying your first home, go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops


3 P’s of Purchasing a Home

When buying your first home, you should always consider the “3 P’s of Purchasing a Home”.  These include Property, Price and Process.  The two that most people take into consideration are property and price.  They spend endless hours looking for a property that fits their parameters for a home, as well as their budget.  But the item that is often overlooked is process.  So you should ask, “What is the process involved in purchasing this home?”

This mostly varies depending on what type of transaction you are considering.  Specifically, is it a private seller, a bank-owned property, a HUD home, or a short-sale?  Every transaction type can have different connotations, and therefore involves a different process.

A private seller is often the easiest to deal with, and ultimately close.  In this transaction, because the seller has equity they will cash out through the transaction, they will be more amicable to working with the buyer to close in a timely fashion.  They may also be more willing to make any repairs to the property required in order to get financing from the buyer’s lender.

Bank-owned and HUD properties may take a close second in manageable processes.  A bank-owned property is one that was acquired through foreclosure.  Negotiating price and getting a great deal is sometimes easier with these properties.  This is because the asset manager that is ultimately making the final decision, doesn’t necessarily stand to benefit if the property sells for a bit more.  They are often most concerned with accepting an offer from a buyer that has a high probability of obtaining financing and also wants to close as quickly as possible.

HUD homes (properties owned by the Federal Gov’t) are similar to bank-owned properties in that the asset manager handling the sale of the property also doesn’t necessarily have a tie to the total amount received for the property.  They are most concerned with getting a sale, and closing quickly.  The flip side of the coin with bank-owned and HUD properties, is it can sometimes take a week or two to find out if your offer was actually accepted.  This is often due to the fact that the asset manager isn’t just handling the sale of one property, but sometimes hundreds of properties.  The other thing to keep in mind is that these properties are almost always sold As-Is, which means that regardless of the condition of the property the seller (or asset manager) is usually unwilling to make any type of repairs to the property (even if it means your lender refuses to finance the home without the necessary repairs).

The last situation is a short-sale.  This is an instance where the private seller still retains ownership of the property, but the underlying leinholder must give final approval of the price because the equity of the home is “short” the mortgage balance.  In other words, there won’t be enough proceeds after the sale to pay the bank back in full, so they have to sign off on how much of a loss they are willing to take.  This piece of the puzzle is what makes a short-sale hard to close, or in some instances even an uncloseable transaction.  Again, the asset manager representing the bank is probably dealing with hundreds of properties, which is why it can take upwards of six months get a response from the bank.  Also, it is completely possible that after waiting six months to get a response from the bank, that response can be, “No, we will not approve the sale at that price.”

Because of all the potential outcomes to these different scenarios, it is imperative to understand which process you are involved with and what the actual probability is that your transaction will actually close.  If you’re buying your first home and want to make an informed decision, go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops