Jay Turney - REALTOR

Washington State Licensed Real Estate Broker

(206) 240-7240

Tuesday, May 8, 2018

Is Seattle/the Eastside in a housing bubble?

This is a great topic and discussion, and is one that is often mired in misinformation and ignorance.  Before we dive in let's first define some of the terminology and the factors that are involved.

The first question for this discussion is "what is a housing bubble"?  Investopedia defines it as "A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance.  Housing bubbles usually start with an increase in demand, in the face of limited supply, which takes a relatively long period of time to replenish and increase."

This definition touched on another major factor - supply and demand.  Supply and demand is a basic economic theory that the price of an item will be driven primarily by two factors - how many of the items are available to purchase (the supply) and how many people want to buy them (the demand).

First let's talk about supply.  What is the vacancy rate on rental properties and apartments?  Are there lots of units available or are they hard to come by?  How many months of supply of homes for sale are currently active (this looks at how quickly all of the homes currently for sale would be sold if no additional homes were put up for sale) in the local Multiple Listing Service (MLS)?  Generally a six-month supply is considered a balanced market - more than that favors the buyers, (and drives prices down,) less than that favors sellers (and drives prices up).  Are housing starts (the government counts construction on a home or apartment as started when excavation begins on the foundation) keeping up with the demand?  Here again it's a bit of a balancing act.  If builders build too fast or too many units they can sit vacant and drive prices down (and the builder can lose money or even go out of business).  If they don't build enough people struggle to find housing and prices go up.

Next we'll talk about demand.  Demand really depends on the specific local area and has many contributing factors of its own.  These often include things like:  the local job market, the current home/apartment inventory, transportation/commuting options, quality of life, cost of living, average wages, etc.

Then there's capital appreciation - the increase in value of assets over time.  Since creating more land isn't really an option in most cases, land tends to increase in value over time.  There are exceptions of course, such as land near a toxic waste dump or in an area suddenly prone to landslides or sinkholes, but most land tends to go up in price over time.  Land that is more "desirable"; often properties that have views, are on some sort of waterfront or are near a college for example; tend to increase in value faster than properties that are too far from most places of employment, freeways, or shopping and entertainment for example.

A major factor in this discussion is the local economy.  Is there job growth in the area?  What kind of salaries/wages come with the jobs?  Are there incentives for businesses to set up shop or expand in the area?  What does the local talent pool look like for the employers?  What is the quality of life like in the area - will employers be able to attract (and retain) talented people?

So now that you're thinking about some of the numerous factors and have some basic definitions, let's get into the realdiscussion, specifically for the Puget Sound region (or more specifically, the Seattle/East-, specifically for the Puget Sound region (or more specifically, the Seattle/East-side areas).

As you can see, there are many factors involved.  There are two main topics I want to address here are:  1) Why would people say we are or are not in a housing bubble? and 2) Are we in a housing bubble?

1)  Why would people say we are or are not in a housing bubble?  There are many different motives for people either saying we are or that we are not in a housing bubble.  First and foremost, consider the source.  Do they personally have something to gain (or lose) depending on the answer?  Are they trying to convince you to do something (or not do something)?  Are they just repeating something they heard or read or do they really know something about housing bubbles/economics?  These are all questions you should ask yourself (or maybe even the person making the statement).  I tend to also blame the media these days since they love to sensationalize things and blow things out of proportion (think of weather forecasts for snow for example - the snowmageddon and snowpocolypse forecasts for example).  They love to grab headlines (and it's not by saying things are good or focusing on the positive...).  When it comes to local real estate, I can only speculate that those folks are are either saying it to (attempt to) sound knowledgeable or to persuade you to sell your home.  I think it is inappropriate for anyone to make a statement of their opinion as if it were a fact.  If they are doing so for personal gain, (and known that their statement(s) are not entirely factual,) I would go so far as to say it is unethical.    I have seen many real estate flyers/read advertisements or posts from fellow brokers/agents and cringe every time.  I hope that they are truly doing this out of ignorance, that they really do not know that they are stating opinions as facts and not backing them up with any evidence or facts.  This type of behavior drives the Engineer in me crazy and I consider it unprofessional at the very least.

2)  Are we in a housing bubble?  In all honesty, nobody really knows if we are in a housing bubble or not - they are just providing opinions; some theirs, some those they have read or heard.  Any statement about the existence of a current or future housing bubble should really be preceded by "in my opinion" or "I think" or something similar, because that's all it is - an opinion.  There is no real way to know if we are in a housing bubble.  The difference between a bubble and just high value (often questioned when there is rapid and/or high appreciation) is really just a question of is it sustainable?  It is also important to question what is causing the prices to rise so much and so fast.  Will supply and demand keep the prices where they are or even drive them higher?  Something has to cause a rapid decrease in value/prices for it to be considered a bubble that has popped.  This is really only known/proven when it is in the past and you can look at all of the numerous factors and say "see - this was a bubble and these things together appear to have been the reason it popped".  The mortgage/lending practices drove the last one.  That's definitely not a driver now (talk to anyone who has applied for a mortgage recently - it's much tougher to qualify now, and appropriately so).  Is the local economy about to tank?  I highly doubt it.  The diversity of businesses and their relative strength point more towards growth (or at least sound footing) than towards collapse.  A collapse of the stock market would affect local real estate, but I still wouldn't call it a real estate bubble (and I'm not sure I believe that's coming either - maybe some fluctuations and corrections, but not a collapse).  I cannot honestly say that we are or are not in a housing bubble, but...

If you are interested in my opinion about whether or not we're in a housing bubble, read on...

What are homes really worth?  The Seattle housing market has grown, and homes have been appreciating at an amazing rate (and it seems to be accelerating).  This has led to much of the speculation that we're in a bubble, but are we?  So what is a home really worth?  It is truly worth the amount someone will pay for it.  It doesn't matter if someone else will pay that much (or that little) for it, it is worth exactly its final sale price at the time it is sold.  The next day it could be worth more, it could be worth less.  It all depends on who the buyer is and what they're willing (and able) to pay.  The Seattle Times ran an interesting article on local home prices - it is available here:  https://www.seattletimes.com/business/real-estate/king-county-housing-market-kicks-off-2018-even-hotter-than-before-as-seattle-breaks-price-record/.

What does the local supply of homes look like?  Scarce.  I've read that a six-month supply is needed for a balanced real estate market.  We have about one month's worth.  There is a lot of construction (and remodeling) going on, but it's nowhere near enough.  I've read studies that say that even if housing starts continue to accelerate, that it will take almost 10 years for supply to catch up with demand, and I personally think the demand estimates may be low.  There was a very interesting article in Seattle Magazine about the city's growth - you can read it here:  http://www.seattlemag.com/news-and-features/seattles-scorching-housing-market-joining-ranks-global-cities.

So what's driving the demand?  Jobs, jobs, and more jobs (and many come with significant salaries as well).  The Seattle economy used to depend a great deal on one company - Boeing.  Now there are many other companies in a wide range of industries.  The economic landscape has become nearly as diverse as the local population.  The area is now home to many companies and have at least a significant presence from many others.  Some of these employers include:  Boeing, Microsoft, Amazon, Starbucks, Nordstrom, Facebook, Google, Redfin, Zillow, Expedia, Bungie, REI, Nintendo of America, Concur, Costco, Paccar, Weyerhaeuser, and SpaceX to name a few.  There are so many more, and many of these companies are hiring and planning to expand their presence in the area. 

So what does this all mean?  Again, this is just my opinion, but I believe the local real estate appreciation is appropriate based on the appeal of the area, the lack of supply, and the demand driven by the strong local economy.  I also believe, (based on other articles that I've been reading,) that the local economy is expected to continue to grow if not accelerate, and the supply of housing isn't increasing fast enough to keep up which means that real estate prices should go even higher and likely accelerate their growth.

Do I believe we're in a real estate bubble and it's about to pop - not only no, but I'm personally looking to buy additional real estate in the area now because I think it's going to appreciate even more dramatically than it already has and I want to get in while interest rates are still relatively low as are the prices.  Ask me in 5 years if I was right.  :)

Everyone is entitled to their opinion...

If you would like to discuss this with me, (or about signing me on as your agent,) just call, text, or email - I look forward to hearing from you.

Friday, January 19, 2018

Be an informed buyer or seller!

Knowledge is power.    Do a little research if there is something specific about zoning or HOA rules or whatever that you want to know about before buying (or selling) your next home.

Real Estate Agents know about one thing - real estate. On an individual basis some may know about other things as well, but unless they're also licensed in those areas, they should not (and cannot legally) perform in any other role.  A simple example is the modification of the Purchase and Sale Agreement form.  A licensed real estate agent can fill out the form (and the addendums) but modification of the form requires a lawyer.  If a real estate agent modifies the form they could be considered practicing law without a license and no good can come of that...

The internet has a wealth of information (but confirm your sources) as does your local library.  You can also find free classes offered by real estate offices, title companies, or lenders in your area (among others).  Ask a real estate agent.  If they don't know the answer (or it is not a subject covered by their license) they often point you to someone who does or somewhere you can find it.  Don't rely on opinions or 2nd or 3rd hand knowledge.  It's worth the time and effort to get the facts!

Do a little research, attend a class or two, ask questions - you may benefit more than you think...

Friday, October 19, 2017

Looking to move up but worried about selling your current home first or going with a contingent offer?

If you qualify you could consider using a HELOC on your current home for the down payment on a new one.    This would allow you to purchase the new home and give you some additional options with your current home.  Let's delve into this a bit.

When looking to upgrade (or to downsize) you're faced with some big decisions; do you sell your current home first, but then worry about where you will live until you buy your new home; do you try to buy your new home with a contingent offer (the contingency being the sale of your current home); do you keep your current home as a rental of defer the sale until after you've closed on your new home and moved (have you even considered this)?  Let's look at each question a bit.

Do you sell your current home first, but then worry about where you will live until you buy your new home?    This allows you to purchase the new home without any contingency on the sale of your current home. It also answers any question you may have had about how much you would get for your current home.  You could look at a lease-back on your current home, or a short-term lease on an apartment, or hope you can time the purchase of the new home and the sale of your current home perfectly...  What's the right answer?  That depends on you, your situation, and what you're comfortable with - what's right for you may not be right for someone else (and vice versa).

Do you try to buy your new home with a contingent offer?  This alleviates the concern about timing or where you will live during the transition.  This does add a slight complication the new purchase offer.  A contingent offer can also be less attractive to a Seller so it may be more difficult to buy your new home (you may lose out to a non-contingent offer).  This all being said, contingent offers are very common, and if it's right for you then by all means go this route.

Do you keep your current home as a rental of defer the sale until after you've closed on your new home and moved? This option, if you can afford it, is definitely worth some serious consideration.  Let's look at deferring the sale first.  If you go this route you can set your own schedule for moving.  You can then really prep the home for sale since it will be empty (or better yet, appropriately staged - once the work is done anyway).  If you can have contractors lined up and ready to go you can get any work done pretty quickly (and it's easier for them to work without your "stuff" in the way).  Price is then the big factor.  In this area, if a home is priced correctly, it will sell quickly (we're talking days or maybe weeks, though there are always exceptions - you need to be mentally and financially prepared for "things taking longer than planned").  A staged home, especially one that has been "readied for sale" often sells faster and for more money than one that is "lived in".

Another alternative here is to keep your current home and turn it into a rental.  You can generate passive income and additional tax deductions from owning a rental property.  Being a landlord is much easier with so many services now available from a few clicks on a web site.  Posting an ad on Craig's List or Facebook is easy (and free or at least very inexpensive).  Your broker may even do property management and may handle things for you (for a fee).  Talk to them if this seems like it might be an option for you.  They may have some good advice and a recommendation.  Personally, I have had very good experiences being a landlord and have been one for over 16 years now (and doing my own property management for over 15 of those years).  Rentals come in all shapes, sizes, and price ranges these days, so don't immediately rule this option out because you don't think anyone will pay enough - you may be surprised.

So where does the HELOC come into play?  If you're looking at either deferring the sale, or turning your current home into a rental and don't have enough cash for the down-payment on the new home, that's where the HELOC can come it.  You can get a HELOC at a great rate to leverage the equity in the current home to either come up with the down-payment on the new home or to "cover things" until your current home sells.  You could get a 2nd mortgage or refinance your primary home to accomplish the same thing, but the timeline is usually longer.  Talk to your lender (and maybe an additional lender or two) and discuss options.  You may be pleasantly surprised at the answers.

Think, ask, and consider your options - you may have more available than you thought...

Friday, September 22, 2017

Feeling pressured by your real estate broker?  That's not good!

Encouragement and trying to help get you into (or out of) a home can be good, but pressuring you is not!    I'll dig into this a little and share some insights and discuss motivations, as well as make some recommendations as part of My $0.02.

Just like people in nearly every profession, some brokers are living paycheck-to-paycheck and need the money.  Others are just excited about helping you buy or sell your home and don't even realize they're pressuring you.   Regardless of the situation It's a good idea to talk to your broker about their motivations and understand where they're coming from.  Setting clear expectations and better understanding each other is always a good thing.  You can often clear things up and improve the relationship just by talking (hmmm - this applies to pretty much any relationship for that matter, doesn't it?).

Sometimes personalities just don't mix well and that can make things worse.  And just like other relationships, honesty and communication are usually best.  If you aren't happy or comfortable with a particular agent, talk to them first and see if you can work things out.  If it just isn't working, then make it clear that you are ending the agency and will be finding/going with another broker.  If your prior broker showed you a home first they may be entitled to commission if you purchase that home as well.  Again, to make everything clean and clear, open and honest discussions work best.

If you talk to your broker and find out they are one of the ones living paycheck-to-paycheck, is that a bad thing?  I'd say not in and of itself, especially if you know.  Personally I'd rather help someone out who really needs it rather than help finance the next luxury item for the trophy wife/husband or a new car for the spoiled child.  On the other hand, I don't want to pay the price myself in paying a higher commission for lower quality service or worse yet, poor service because a broker needed the money and pushed me into the wrong deal (at least wrong for me at the time).  Sometimes you get what you pay for, other times...

Personally, I always prefer to work with people who really love and believe in what they do.  The passion for their profession usually means better service on many levels.  The quality of work and the drive to "do things right" often shows in all they do, and their enthusiasm can be quite contagious.  They can also get wrapped up in the job and trying to make a deal happen, even when it might not be the right deal for you, so be careful here as well.  You don't want to get caught up in a broker's enthusiasm and lose sight of what you really want/need either.  Throughout the process keep your goal(s) in mind.


Again my recommendation is to talk.  It really is that simple.  Talk about your situations, talk about your goals, talk about potential deals.  Talk.

Talking can make great things happen!

Thursday, September 14, 2017

Taking a step back from my post on August 22, 2017, How should you pick a real estate brokerage or company when buying or selling a home?

Before picking a broker, you may want to do some research on the different brokerages / companies out there.   Believe it or not, they are not all the same.  In my opinion they are also not one-size-fits-all.  There are nearly as many types of brokerages as there are places to buy clothes, with even some similarities in their overall philosophies and target clients.  Let's take a look at some of the ways in which they differ, then I'll throw in my $0.02 as to why this matters.

What's different for the clients?  Some of the brokerages charge different rates so your costs may vary (this is most often on the listing or selling side).  Many offer different services or provide different levels of service.  Some brokerages encourage their brokers to spend time explaining things to clients and educating them.

What's different for the brokers?  Some brokerages set different expectations on their brokers.  Some are fast-paced and focus on volume.  Others have their personnel specialize so you deal with different people depending on what stage of the process you're in.  Others set quotas for their brokers (number of homes listed or sold each month/year/however they choose to set their criteria) and if they don't meet their quota ...  That puts pressure on the brokers.  Some pay fees to the brokerage every month (even if they're not making any money) just to be a part of that brokerage.  Others split the commissions, and some do a combination of both.

What's different for both?  Some brokerages have established step-by-step processes their agents (are at least supposed to) follow.  Others have absolutely no standardization or guidance and you are left to the knowledge, strategies, and resources of the individual broker.  Some brokerages operate as a team - sharing knowledge and advice and backing each other up.  Others are more "competitive" (i.e. cut-throat or dog-eat-dog) and are really just a group of individuals using the same logo/paying the same front office.  Many fall somewhere in-between.  Some brokerages provide their brokers with lots of training opportunities and materials.  Others expect their brokers to get it on their own.

So how do you choose?  Well, as I often say, it depends.  Do you like shopping at Wal-Mart or is Neiman Marcus more your style.  Do you want someone helping you every step of the way or do you just want someone licensed to push things through for you.  Your level of knowledge and comfort may drive you to a particular brokerage because it suits you best.  If it is your first real estate transaction you will likely have more questions and you would be better served by a brokerage that encourages their brokers to spend time explaining things to their clients and provides their brokers with the training and materials to do that effectively.  You may also prefer to develop a relationship with your broker so you are more comfortable with them and would want to work with the same person throughout the transaction.  If you've bought and/or sold multiple properties and don't need any help and knowledgeable and comfortable with the process, then a brokerage that offers the lowest fees or some sort of credit, but the broker has limited time for you or you work with a series of different brokers might be best for you.

It is always a big decision, especially financially, so you need to do what's right for you.  Ask questions.  Think about the answers they give, then ask more questions.  Think about the different parts of the home buying or selling process and think about what could happen / what things could pop up.  Then think about the brokerage and how it treats its brokers, then think about the brokers you're considering.

Shop around.  Ask questions.  Then decide.


Wednesday, September 6, 2017

School is back in session - isn't this a bad time to buy or sell a home?

Moving kids to a new school may be a little disruptive, but aside from that I'd say the answer is No!  No matter what season it is, or whether or not school is in session, or if the weather is bad or good, there are always homes for sale and buyers looking.  There are LOTS of different things to consider when either buying or selling a home and it's good to at least think about them all.  Let's look at some of the many factors, and my two cents.  :)

Isn't it true that some sellers will take their homes off of the market or not put them on the market at this time of year?  Though there may be some sellers that may do just that, not all will.  Do you only shop at the once-a-year sales?  Do stores still sell items at other times of the year?  Can you find what you're looking for and get a good deal at other times of the year.  Of course, and housing is no different.  Just because it's not the most popular time to buy or sell, doesn't mean it isn't a good time.  Below is a graph of both residential and condominium listings by month for the past 11 years.  You can clearly see the cycles.

As you can also see, there are new listings every month, just fewer in the "off-season".  There are typically also fewer buyers in the "off-season" as well so the level of competition doesn't really change much and neither do the prices as the chart below shows (prices tend to follow the market overall much more than the season):

 In a "normal" market homes may remain on the market a little longer during the "off-season" and may sell for slightly less, but that is not always the case, and this is nowhere near a "normal" market.  There are sooo many buyers looking and inventory has been extremely low for quite some time.  The local economy continues to grow resulting in more people moving into the area increasing the demand for homes (and condos) even further.  Many experts are forecasting that the growth will continue for at least the next 3-5 years and that prices and demand will continue rising accordingly.

So what's the answer/what should I do?  Be Patient!!

If you are looking to sell, pick a time that works for you - don't worry about the market.  Set your expectations that it may take longer than the week or so we've been experiencing this summer, but with the number of buyers out there and the limited inventory, if you price it right, it will still sell quickly.

If you're looking to buy, get pre-approved and keep looking.  Homes are coming on the market every day.  Keep looking and keep refining what you're looking for, but it's very important to be pre-approved so you are ready to make an offer if you find what your looking for.

Best of luck to you!

Tuesday, August 22, 2017

How should you pick a broker when buying or selling a home?

That is a Fantastic question and one I've heard a lot!  There are LOTS of Real Estate Brokers out there. Each has their own strengths and weaknesses, their own motivations, their own style, and their own personality. Working with a broker, when either buying or selling a home, is a relationship with significant financial decisions involved. Choosing the right one is crucial - it can make or break deals, benefit or cost you large amounts of money, leave you feeling happy or cheated.  I strongly recommend that you meet with multiple brokers, ask lots of questions, and spend time with them before committing to an exclusive agreement.  Let's look at some common perceptions, then I'll add my two cents.  :)

Some people will say it should be the best known broker in the area.  That may be true, and it may not.  You should look a little deeper and ask additional questions.  Why are they known?  What are they known for?  Do they live in the area or just sell homes there?  If they live there, how long have they lived there?  How large of an area are they covering?  Why have they chosen that area?  Personally I lean more towards the local experts, the ones who live there - not necessarily the ones who advertise or do more business there, but this isn't a major consideration for me.

Some say you should go with the busiest broker in the area.  Think about that for a minute.  How busy are they?  Will they have time to give you the attention you need and deserve or are they spread too thin?  Will they be the one really working behind the scenes or will they hand things off to their staff or assistants so you really don't wind up working with them much at all.  I'd rather deal with someone who has more time for me, but you also need to make sure there's a good reason that they have the time available...

Is the broker with 30 years of experience, the brand new broker, or someone in-between right for you?  Good question. There are pros and cons for each.  Some will say you want the broker with the most experience - they've seen and done more and may have better guidance.  Some will say the new brokers are more in-touch with technology and bring new tools, skills, and abilities to the table.  They also tend to be more "hungry" for the business so they'll work harder.  They are also under the direct supervision and guidance of their designated broker (or managing broker) for their first two years so you get additional support behind the scenes.  Others will say you should go for the ones in-between.  As I said, each has their pros and cons, and the broker right for one person may not be the right broker for another.

Some say you should pick the one with the best reviews?  Again, don't just take things at face value. Do some research.  Are they real reviews?  How recent are they?  Do they post them all or just the good ones?  When reading the reviews don't just think about what they said, think about what they didn't say as well.  Did the review just focus on one aspect and if so, why?  Don't be afraid to ask brokers about their reviews.  Consider reaching out and communicating with the reviewers as well.

Should you just go with a broker that a friend or family member recommended?  I would definitely consider any recommendation from someone you trust, but I would NOT "just go with them".  I would definitely be interested in meeting them, asking questions, and finding out more about them, but would not automatically sign an agency agreement with them based solely on the recommendation.  Meet with them, ask questions, get to know them (at least a little) and then make a more informed decision.

So what is the right answer?  Here's my $0.02:

  • Find a broker you're comfortable with!
  • Do your homework, ask around, and do some research.
  • Sit down and talk to multiple brokers before committing.
  • Meet with potential brokers and when you meet with them, treat it like you are interviewing them - you essentially are and are going to hire one, so treat it that way.  Spend enough time with them so you know if you feel comfortable with them.  You will need to trust them with some major decisions so this is really important.  You need to be comfortable and confident with their knowledge, skills, advice, and attitudes.  Give this decision the time worthy of one of this level of importance.  Your broker will be your partner throughout the transaction (and possibly others in the future) and may become a friend as well.  It's not just about the skills and knowledge - it's also about the relationship.  Take enough time and decide who the right broker is for you.

    Monday, August 14, 2017

    Is it really "Can I afford to buy" or is the better question "Can you afford to wait"?  Talk about a topic that generates a lot of discussion.  I made the above info-graphic a few months ago, but the topic keeps coming up.  My crystal ball/psychic abilities are limited, so I can't say for sure, but most of what I'm hearing and reading these days points to the latter.  If you're considering making a move in real estate, be it to buy your first home, to upsize, or to downsize, there's no time like the present.  Interest rates are still low and most indications/talk on the street points to prices continuing to climb, especially here in western Washington.

    Talk to a lender (or two or three).  If you think you may want to make a move anytime in the near future, (within the next year or two even,) talk to a lender now!  It's free, painless, and is really the only way to find out where you really stand.  Even if the lender confirms that you're not ready right now you can gain invaluable advice on what you need to do to get yourself ready.  Do you need to pay down some specific debt?  Do you need to work on that credit score?  Can you re-package some existing debt now and take advantage of some fantastic programs that are available right now?  The only real way to find out is to make that call and talk to a lender.  I'd recommend talking to two or three and shopping their rates/programs.

    If buying your "dream home" isn't yet an option, can you buy a starter home or even pick up a rental home to get your foot in the door of the real estate market?  Give these options serious consideration.  I know folks who are doing just that.  They don't want to miss the opportunity today's interest rates and the expected appreciation bring.  Being a landlord with the internet at your fingertips is much easier than it used to be as well.

    Get the facts, do the research, ask questions, then ask more.  Don't assume - that can get you in trouble, or cause you to miss out.  Take a little time and get the information you need to make an informed decision.  Consider your options.  Talk to someone your trust; a friend, a spouse, a parent, a financial advisor, or a friendly real estate agent.  Then ask more questions, weigh your options, think about the risk and the potential rewards.

    Then, finally, after careful consideration, make your own decision.

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