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October will be the last month with good inventory — so now’s as good a time as any to buy
Summer is over, but the real estate market is just catching up.
The heyday for the market is typically between May and October, when the sunshine makes for nice pictures and easy open houses. Which means that the final month is here to take advantage of the housing market before the fall drop-off.
A Craftsman Style house in autumn.
Is Seattle’s red-hot housing market cooling down?
For the first time in 10 years since the recession, the number of homes for sale in the Seattle area has increased considerably, reports The Seattle Times.
“There aren’t as many bidding wars right now,” said Beata Miklos, Managing Broker for Savvy Lane, a local online brokerage firm. “There isn’t as much urgency for buyers to place offers because they know that it’s softening up a little bit.”
Fierce competition for low-inventory of homes for sale has led to extreme bidding wars and lightning-fast sales. Now, the total number of single-family homes on the market in King County has jumped 43 percent in June from a year ago. And condo inventory has risen to an eye-opening 73 percent.
The Times reports homes already on the market are sitting unsold for longer periods of times, according to monthly data released Thursday by the Northwest Multiple Listing Service. Brokerages tell the NMLS since mid-spring, they’ve noticed fewer bidding wars and more homes selling for list price or below.
The total inventory of homes listed for sale has grown for three straight months on a year-over-year basis, reports the times, but the region still has a ways to go to make up for the past 10 years of declining numbers of homes for sale.
Now is the time to jump! The price drop from May to June is the first price drop in King County since before the recession.
If you’re thinking of making the move from renter to homeowner, simply diving into home shopping is the wrong first step. What you need to do is first answer the question:
“How much house can I afford?”
The best way to determine your spending ability is to do a step-by-step calculation. While there are alternate rules of thumb for figuring out your housing budget — such as a ceiling of 2.5 times your annual salary or limiting your housing payments to a third of your gross monthly income — you should not take shortcuts on a financial decision as important as this.
Calculating ‘how much mortgage can I afford?’
Here are the major factors you will need to consider to determine how much house you can afford to buy:
Income.
First, add up the income that will be used to qualify for the mortgage, including bonuses and commissions. Make sure you have the documentation to prove every source of income; otherwise it cannot be counted when you meet with a mortgage lender.
Debt.
Add all the payments you make each month for car loans, credit cards, student loans and any other debt. Based on your income, there are limits on how much debt you’ll be allowed to carry, including your mortgage. These debts will limit how much mortgage you can borrow.
DTI ratio.
When a mortgage lender calculates your level of debt based upon how much money you make, it is known as your “debt-to-income (DTI) ratio.” Debt-to-income ratios are the province of mortgage calculators. One important ratio, referred to by mortgage professionals as your “front-end” or “top-end” ratio, is calculated by taking your proposed housing expense divided by your gross (before-tax) income. Many mortgage calculators set 28 percent as the desirable value for this ratio. The other ratio involves all of your loan payments – your housing expenses and your monthly debts (but not utilities or other living expenses) — divided by your gross monthly income. A home affordability calculator frequently set this number at 36 percent. This is called your “back-end” or “bottom-end” ratio.
Monthly obligations.
While your mortgage lender cares about your auto and credit card payments, they really don’t care whether you have cable TV, the latest iPhone or even that you eat on a regular basis. Those monthly expenses are up to you to include, and cable, smartphones and a few trips to the grocery store can easily add up to several hundred dollars each month.
Down payment.
The minimum down payment for an FHA loan is 3.5 percent; for conventional loans, the minimum is 3 percent for certain buyers and 5 percent for most buyers.
Taxes.
Today, it’s easy to get an idea on a home’s property taxes by looking at the listing online. You can also get in contact with the county tax office or ask a local Realtor to investigate for you. Most homeowners will have their property taxes paid from an escrow account attached to their monthly mortgage payments. One percent in taxes is equal to $1,000 per year for a $100,000 home.
Insurance.
Lenders require homeowners insurance to cover your property. Contact an insurance company or ask a Realtor to estimate your homeowners insurance costs which will vary according to the type of property, cost and features of the home, and its location. To get a rough idea, you can ask a family member or friend what they pay for insurance (if their home is similar to the home you are interested in buying).
Homeowners association dues.
If the property you purchase includes monthly dues, don’t forget to include those fees in your monthly payments.
Mortgage insurance.
If you make a down payment of less than 20 percent on a conventional loan, you will need to pay mortgage insurance. You can utilize HSH.com’s mortgage insurance calculator to see how much this could cost each month. For FHA loans, there is an upfront and annual mortgage insurance premium.
Interest rate.
You can check today’s mortgage rates at HSH.com, but remember that your rate will depend on your credit score, the type of property you are buying, and the choices you make regarding fees and points. A lender will be able to give you a customized mortgage quote given your situation.
Loan term.
While many buyers opt for a 30-year home loan, if you can afford higher monthly payments, you may want to consider a shorter loan term. Shorter loans have lower interest rates and cost you less over the life of the loan.
As a homeowner, you need to have enough money set aside in an emergency fund — at least three months worth of expenses – in case you lose your job or have a medical emergency, and enough reserves set aside to pay for maintenance and unexpected repairs.
Considering all your financial goals and your monthly comfort level with your mortgage payment is the key to accurately calculating how much house you can afford. It’s smart never to borrow the maximum amount you can qualify for so that you leave yourself some financial breathing room.
Keith Gumbinger
Seattle has earned a couple of titles that explain a lot of the tension going on in the city lately: it is the fastest growing big city of the last decade and the hottest housing market in the country, a designation it has held for 19 straight months.According to the latest update from the Case-Shiller national home price report, Seattle home prices in March rose 13 percent over the same period a year ago, followed by Las Vegas and San Francisco. While Seattle has held its place at the top for some time, Las Vegas and San Francisco were ranked 10th and 16th, respectively, on the list, a year ago.
The main reason behind Seattle’s reign at the top of the for-sale housing market? A lot of new people, and not a lot of homes to buy.
Citing recent U.S. Census data, The Seattle Times reports that Seattle more than 114,000 people came to Seattle since 2010, pushing the population to nearly 725,000 people. This dizzying increase of 18.7 percent ranks first among big cities. To put those figures in perspective, Seattle added about the same number of people over the previous three decades.
In 2017 alone, census data shows Seattle’s population increased by about 17,500 people or about 1,458 people per month. If that pace has continued throughout this year, the number of new people in the city would nearly double the 730 active listings for homes and condos in Seattle for the month of April, reported by the Northwest Multiple Listing Service earlier this month. Stepping outside the city limits, last year’s population gains outpace the total number of active home and condo listings for all of Western Washington at 10,079.
This decade has seen a migration back to cities, reversing a decades-long trend of population increases to the suburbs, and Seattle’s growing tech reputation has made it a top choice. People from all over the world have flocked to the city to work for homegrown tech giants like Amazon and Microsoft or the 100-plus companies with engineering centers in the area, led by household names like Google, Facebook and Apple.
As home prices continue to skyrocket, apartment rents are starting to level off after years of record-level construction. The effect is filtering down to rental homes as well, as new construction creates more choice in that area. The region has not seen a similar wave of construction in the for-sale market to match the demand for new houses.
Population rises have led to growing pains in the city, highlighted by the controversial debate over a tax on big businesses. Amazon, now the face of the debate and Seattle’s struggles with growth, has following the passage of the tax threatened to slow growth in its hometown, which some observers say could actually have some benefits for the city.
BY NAT LEVY on
If you haven’t given much thought to selling your home this year, you might want to think again.
Real estate information company Trulia commissioned a survey of more than 2,000 U.S. adults, conducted by Harris Poll, to get a feel for expectations and plans for housing and homeownership in 2018. The survey results show 31 percent of respondents expect 2018 to be a better year for selling a home than 2017 – and just 14 percent expect it to be worse.
Despite the enthusiasm, only 6 percent of homeowners surveyed plan to sell their home in 2018.
Real estate information company Zillow echoes these sentiments in its predictions for 2018, expecting inventory shortages to continue to drive the housing market. With too few homes on the market to meet buyer demand, prices increase and would-be buyers can’t afford the price or down payment needed to submit a winning offer.
Buyers are chomping at the bit. Eager homebuyers have been frustrated over the last few years, experiencing low inventory in most major markets, which is pushing them to start home shopping earlier in the year to try to beat out the competition and ensure they’re not missing out on any available properties.
Even before the clock struck midnight on New Year’s, people were already getting a head start on looking at buying or selling a home in 2018. Real estate information company HomeLight saw a 25 percent traffic spike on its website on Dec. 26, with continued high rates of traffic through the first part of the new year.
“Folks have generally turned their attention away from the holiday and time with family and friends, and moved onto the new year and what they want to accomplish,” says Sumant Sridharan, chief operating officer of HomeLight. “And for many people, that tends to be where they want to live.”
The best time to sell your home is traditionally between March and June, Sridharan notes, while warmer climates may see a longer time frame because they’re not restricted by weather. But cold weather isn’t keeping interested buyers from starting their home search at the start of the year. The fact that buyers take the day after a major holiday to start looking for new home means the traditional selling season could be even hotter.
And while the last couple years have proven beneficial for sellers, seeing many homes sell for asking price or above, it won’t last forever. Zillow predicts home builders will begin looking to construct more entry-level homes to meet demand later this year. If you wait too long to put your home on the market, you may find yourself competing with new builds that haven’t been a part of the market in large numbers since before the recession.
Interest rates are low … for now. For both the buyer of your home and your own next home purchase, low interest rates can help make a transaction possible. In the second week of January, the average interest rate for a 30-year fixed-rate mortgage was 4.17 percent, according to NerdWallet. Mortgage rate averages reached more than 4.4 percent in 2017, but closed the year out just below the current rate.
While mortgage rates aren’t expected to spike significantly this year, they are forecast to increase overall. The Mortgage Bankers Association predicts 30-year fixed-rate mortgages will rise to 4.6 percent this year, and it expects rates to rise to 5 percent in 2019 and 5.3 percent in 2020.
While increasing interest rates are a sign of a good economy, they can squeeze out some potential homebuyers from the market. The current low rates can serve as a catalyst for many potential homebuyers to get moving sooner rather than later. But as interest rates continue to rise, you’re less likely to see as many bidding wars – which is welcome news for buyers but not sellers.
You can move to find cheaper property taxes. The passing of the Tax Cuts and Jobs Act at the end of 2017 means a few significant home-related tax policy changes for the 2018 calendar year: Mortgage interest rates are only deductible up to $750,000 in debt and property taxes are only deductible up to $10,000.
While these limits don’t affect all homeowners, people who live in counties and cities with high property taxes are likely to feel the financial hit when they file taxes in 2019. If your household is going to struggle without the deductions you’ve had previously, it might be time to look elsewhere.
“For most of the world, I think it really creates a consideration of where I want to be and how I want to be there,” says Cody Vichinsky, co-founder of Bespoke Real Estate, based in Water Mill, New York.
Vichinsky expects housing markets in coastal states to be most impacted by the tax reform – and more specifically in the counties or towns with high-ranked school districts because their property taxes tend to be higher. While homeowners with school-age children may see the education factor weigh heavier than the financial burden, “You’re going to see an exodus out of these neighborhoods for people who don’t need to be there anymore,” he says.
You certainly shouldn’t have a hurried reaction to a policy change with an asset as large as a house, but also keep in mind that if you’re looking for the maximum price on your home, the longer the new tax law sinks in, the more likely it is to change feelings toward pricier neighborhoods in coastal markets.
“We do expect, potentially, in the longer term there may be lower demand at the higher price points because the tax [incentives] just aren’t there,” Sridharan says.
Renovations today won’t come back in full next year. Zillow’s 2018 predictions include the expectation that most homeowners will focus on renovations and updates this year rather than selling. If you’ve got remodeling on your schedule for the year, be sure it’s an update for you because it’s unlikely that renovations will have a 100 percent return when it comes time to sell.
“You’re going to get one shot at this,” Sridharan says. “Ultimately the additional money you’re going to spend to make your home look amazing is going to be far less than the amount of money [a buyer will pay].”
The key to taking advantage of the seller’s market this year is not taking the tight inventory for granted. Buyers will still expect effort from sellers in preparing a property for sale. While they may be willing to overlook a dated kitchen, it’s the clutter, deferred maintenance and lack of curb appeal that can still kill a deal. If you do decide put your house on the market, take the process seriously, and you’re likely to see ample interest.
The temperature may be frigid across much of the nation, yet home prices are sizzling and sellers are in the hot seat.
Sales prices jumped 7 percent annually in November, according to a new report from CoreLogic.
That is the third straight month at that pace, far higher than the price gains in the first half of 2017. Low supply and high demand are fueling the spurt and neither of those is expected to ease up anytime soon.
“Rising home prices are good news for home sellers, but add to the challenges that home buyers face,” said Frank Nothaft, chief economist at CoreLogic, in the report. Nothaft said the limited supply is the worst at the lower end, and will hit the growing number of first-time buyers hardest.
The largest metropolitan areas are seeing the biggest gains.
In the nation’s top 50 markets, half of the housing stock is now considered overvalued, based on market fundamentals, like income and employment. CoreLogic defines an overvalued housing market as one in which home prices are at least 10 percent higher than the long-term, sustainable level.
Las Vegas led the November report as not only being overvalued, but showing a double-digit annual price gain of 11 percent.
Las Vegas and Denver are both considered overvalued, but San Francisco is not, as incomes in the tech capital far exceed the national level.
Of the nation’s 10 major markets with the biggest price gains, seven are overvalued. These include Washington, D.C., Houston and Miami. Boston and Chicago are still seeing price gains but are considered at value.
Without a significant jump in home construction, prices will remain high and likely move higher. Mortgage rates could also move slightly higher, and new tax policy limiting mortgage and property tax deductions, is hitting homeowners in some states hard.
All will combine to make housing less and less affordable in the new year.
For those priced out of Vancouver’s housing market, a recent story suggesting that foreign buyers are bailing on Vancouver in favour of Seattle may seem like good news.
But that may not translate into more affordable housing in Vancouver, because even as Seattle becomes the hot new alternative to Vancouver, there are still plenty of foreign buyers staking a claim in the Canadian city.
“A lot of people who were looking in Vancouver are automatically looking further south now to Seattle,” Matthew Gardner, chief economist at Seattle’s Windermere Real Estate,told CBC News.
“It’s like Vancouver, but cheaper,” Chinese real estate broker Yi Liu told the Seattle Times.
The influx of foreign buyers, which Gardner described as “frenetic,” has shot Seattle-area house prices up by 17.6 per cent in the past year, according to the region’s multiple listing service.
A detached home in Seattle now costs US$735,000 (C$934,000). But that is still much lower than the C$1.6 million average price for a detached home in Vancouver.
About half of the foreign buyers in Seattle are from Asia, Gardner said. Chris Hu, the vice-president of Beijing-based real estate agency B.A. & 515J Group, told the Times about half the homes bought by foreigners were for investment purposes, and half were bought to live in.
“The no-growth trend in Vancouver is far different than what we see overall, in all locations.”Byron Burley, Juwai
So does this mean foreign buyers will leave Vancouver alone now? The data suggests that is not happening.
According to an analysis from Chinese real estate portal Juwai, the number of Chinese buyers in the Vancouver market has been “flat as a pancake” for the past year-and-a-half, following a steep plunge in the wake of the foreign buyers’ tax introduced in the summer of 2016.
But Chinese buyer inquiries worldwide jumped 8.7 per cent over the past year year, meaning Vancouver is seeing a shrinking share of overall foreign buyer interest.
Burley says these days there are more “and-or” buyers — people who look into buying a home in Vancouver and/or Seattle, and/or Toronto, rather than just targeting Vancouver.
“When these uncommitted buyers compare Vancouver prices plus the tax to what they can get somewhere else, sometimes they decide it’s not worth it.”
Despite the change in foreign buyer habits, Burley doesn’t see the city’s housing market declining. The market “is more like a pancake than a deflating soufflé. Buyer demand has not collapsed, it’s merely flat.”
This $2,748,000 home has five bedrooms, four baths, four fireplaces and four garage spaces, It was originally built in 1938 but has just gone through a “luxury remodel” by McBride Construction. (Image: Joshua Lewis / Seattle Refined)
Wednesday, September 27th 2017
The 4,733 square-foot home was built in 1900 and overlooks Commencement Bay and has views of the Olympic and Cascade mountains. It was listed at nearly $1.3 million. Joshua Bessex
For most of the housing market, homes are selling in Pierce County faster than owners can put new ones up for sale, drawing down an already dwindling supply of houses just as the market heats up for the spring and summer.
Typically, Tacoma-area homes in the million-dollar range are immune to broader market trends or even what’s happening in King County. Until now.
Think of it as our new trending market, without the bidding wars (yet).
In recent months, dozens of million-dollar abodes have sold or are in the process of closing. If the pace keeps up, sales of homes worth a million dollars or more could eclipse the record of 86 sales set in 2007.
“This is crazy talk,” said Kevin Mullin, owner-partner and designated broker of Windermere Professional Partners in Tacoma. “If all (homes) currently under contract sell, that would mean 42 sales, which is already more than half of last year. And we are not even halfway through the year.”
To date, 16 such homes have sold in Pierce County, with another 26 million-dollar homes pending sale. Among those pending is the $5.5 million Weyerhaeuser mansion, also known as Haddaway Hall.
Compare that with just a few years ago, when 23 residences worth $1 million or more sold in each of 2011 and 2012, according to data from Northwest Multiple Listing Service.
Thurston County also has seen growth in these properties. Just one sold for $1 million or more in 2012, the data show. Last year, nine such homes sold in that county.
Where are these buyers coming from? Many fly in from other parts of the country, said Jeff Williams, a real estate broker for South Sound Property Group, part of Windemere Professional Partners. He works with fellow broker Mark Pinto.
“They could be coming for a job or lifestyle change,” Williams said. “It could be a second home for people who live in California.”
One historic home in Tacoma’s North End listed at nearly $1.3 million. Its sweeping views of Commencement Bay and the Olympic and Cascade mountains drew 25 showings in three weeks — a pace unheard of just a few years ago, Williams said. The final sale price was not available.
Williams and Pinto work together to sell luxury and historic properties in Tacoma, Lakewood and Gig Harbor. They said the luxury or “trophy home” market has heated up in the county in the past six months to a year.
“I think it speaks to the confidence that people have in the market and the broader economy,” Pinto said. “They probably have been sitting on the sidelines in a house that they like, but they want to buy up to that aspirational house.”
Unlike homes at lower price points, high-end buyers won’t get into a bidding war just yet, Williams said.
That’s because it’s a buyer’s market above $1 million. Unlike the rest of Pierce County’s housing market, which has less than one month’s supply in some areas of the county, million-plus homes have a whopping 19.6 months of supply, Williams said. Most of those homes have been on the market for more than 100 days — a dream for a buyer in the lower-end markets.
But not all homes at that price point are priced realistically, Pinto said.
“If it’s completely unrealistic, the phone doesn’t ring,” Pinto said. “Well-priced homes over $1 million are selling and much more so than we’ve seen in years.”
In 1999, just 34 homes in Pierce County were valued at more than $1 million, according to News Tribune archives. Last year, the county valued 715 residences at $1 million or more, according to Pierce County Assessor records.
A living room on the main floor of a nearly $1.3 million home in Tacoma. The 4,733 square-foot home was built in 1900 and overlooks Commencement Bay and has views of the Olympic and Cascade mountains. Many more million-dollar homes are selling in the area. Joshua Bessex
All of the cranes and construction in downtown Seattle signify a city that’s exploding with growth.
New numbers released by the Downtown Seattle Association back that up, suggesting that record development is sweeping through the city.
The association’s new development guide found 68 current construction projects in the greater downtown area at the end of 2016, a new high.
DSA also suggests 6,000 new residential units will be built over the next year. Residential development is particularly hot right now.
Construction on a new 40-story tower called Nexus at Minor Ave. and Howell St. will break ground soon.
“We think Nexus is coming at the perfect time for Seattle,” said Dean Jones with Realogic Sotheby’s International Realty.
Jones says sales will begin shortly on the nearly 400 condos, which are expects to go quick.
Jake Whittenberg, King 5
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