Tag Archives: seattlerealestate

2017 REAL ESTATE PREDICTIONS

Each year I take time to review what has happened during the year and to look forward to predict what is in store for real estate. Below are my predictions for the 2017 real estate market, based on data that was available at the time this was written:

Median Sold Prices – Home prices will continue to increase nationally by single digit numbers, about 5%. However, urban metro areas with high employment or that are in high demand by Millennials may still see increases at 10% or above. According to the National Association of REALTORS®, October’s national median price for existing single family homes was $232,200, which represented a 6.0% increase over October of 2015 (which was the 56th consecutive month of year over year gains). National inventory shortages coupled with high demand will continue in 2017.

Housing Inventory –  Although there are improvements in this category, it will take more than just a year for the situation to turn around. Our inventory shortage was caused by a shortage of housing starts that began during the recession. We will continue to see inventory challenges until new construction picks up even further. I predict that more buyers will be entering the market for a home as our economy is strong with low unemployment. According to the Bureau of Labor Statistics, the national unemployment rate stands at 4.6% for November, 2016, which is the lowest it has been since August of 2007. High demand and low new construction means a continued inventory crunch.

Housing Starts – Housing starts (the measure of homes that began construction) jumped from 900,000 in 2015 to 1.3 million in 2016. Although this is a welcome increase, it is still not enough to quench the demand. Our country needs about 1.5 million new starts per year to maintain inventory, but since 2009, we have been short a cumulative 5 million units. This is one of the primary causes of our inventory shortage and what is driving prices up – demand outweighs supply. In 2017, I predict that builders will finally surpass the 1.5 million start target and our inventory shortage will begin to wane by mid-2018.

Second Home Markets – Investment and vacation homes markets will continue to be strong in 2017. The passing of wealth from the Silent Generation (1925-1945) to the Baby Boomer Generation (1946-1964) is a strong driver of vacation home purchases. Investment properties are a hot commodity, especially in urban areas where rents are skyrocketing due to a shortage of housing.

Interest rates – The improving economy and almost full national employment is a sure sign that interest rates will continue to increase in 2017. The new rates will balance job growth and higher inflation rates. The Federal Reserve increased interest rates a quarter of a percentage point at its December meeting. The federal fund rate has a significant effect on mortgage rates. I expect the 30 year fixed rate mortgage rate will reach 4.75% by the end of 2017.

How to write a bullet proof offer when buying a home in the Greater Seattle area

If you live in the Greater Seattle area, whether you are looking for an in-city condo, your first love’s nest, a view property or a stunning piece of waterfront, you will need a bullet-proof-offer to compete against other buyers. Not every offer has the same weight in the scale. As a buyer, it is pretty intimating to hear that the property you want to purchase has already 15 or more offers. You need to remember however that each one of these offers has its own set of strengths and weaknesses. The key in a multiple offer situation is to protect yourself while writing a very strong & “smooth” & enticing proposal. Here are the golden rules to help you in this process:

#1. Know your limits & be financially prepared

One essential element in buying any type of hot property is to know one’s comfort zone and financing capabilities. And as such, the very first step is to talk to a trusted and experienced mortgage broker who will preapprove you. The lender will ask for your bank statements, income related information, and will pull your credit scores. If cash is an option, get your bank statements/proof of funds ready. Cash offer are more appealing to owners since closing will happen faster and without a bank appraisal. money

In today’s fast market, being contingent on the sale of another property is not an option unless the micro market where you are buying is slow or the property in question has been on the market for a long period of time. As a general rule, waiting to find the rare gem to put your home on the market will not help you. Instead, find a rental place & put your home on the market. Armed with cash, you will be able to put a financially strong offer when you do find THE perfect place.

Another important fact: buying a home in a competing market is like buying an item at auction, you need to know where to stop the bidding. It is therefore wise to start looking at properties available at a lower price point than your preapproval letter maximum amount. Let’s say you are preapproved for $450,000, it may be wise to look for homes in the $380,000 to $400,000 price range. You will want to talk to a realtor expert in that area and specializing in the property type you are interested in to learn about that specific market. There is not one general market but many micro markets in any given area.

#2. Select the right agent for the task

You should select an agent specializing in one field and area: view home, waterfront, luxury, condo, targeted neighborhood…

five star award 2015You want the expert in the field not someone who is learning about a niche market or who is brand new in the business. Someone who knows (and preferably lives) in that geographical area. You will learn about properties ready to come on the market and all pitfalls or advantages about each one. It is not the time to select a friend who is just starting in the business or willing to drive 100 miles to get a sale (as you will need to see that home as soon as it comes on the market)! Get someone who will be a tough negotiator and will speak well on your behalf!

#3. Learn what the sellers want

Once hired, your broker will have to play the “nice detective”. He/she will call the listing agent (representing the seller) to know about the goals and motivations of the owners. If the broker is willing to share this information, you will be able to solidify your offer by adding terms that will benefit the sellers: closing date preference, rent back option (the owner needs to stay a week in the home after closing the sale)…

#4. Waive the home inspection or do a pre-inspection

It is always a good idea to have an inspection even when competing for a property. Have a pre-inspection with a home inspector before writing and submitting an offer.

#5. Offer a higher amount than the listing price

Once your agent will have determined the degree of “hotness” of the property & the local market, and studied the % of asking price versus sold price for that property, I would suggest you start your offer at a higher level than the asking price. If other buyers write offers at the asking price and add an escalation clause your offer will look better from the get go. Escalation clauses: they are used in competing situations. A buyer will offer to pay an upfront price, and add increments of $… over any equal competing offers up to a maximum amount. For example: the house is for sale for $400,000. You are willing to pay up to $450,000 and so may want to start at $425,000 and add an escalation clause up to $450,000 in increments of $3,278. The listing broker will keep adding the $3,278 amount on any offer higher than the $425k and will stop at the $450,000. While deciding on your price comfort zone, understand at which price point you are willing to lose the home where you won’t have remorse if your offer doesn’t get accepted.

#6. Offer a strong Earnest Money

The earnest money is showing that you are a strong buyer. This money will be put in an escrow account and will be cashed once the sale is agreed upon. This is a guarantee for the seller. If the buyer were to change hisearnest_money/her mind at the last minute, he/she would most likely lose his/her earnest money. EM is used at closing and deducted from final closing costs.

The higher the earnest money, the best.They range from 1% to 3% of the purchase price. Selling price $400,000…. Earnest money $10,000 to $15,000

#7. Select Escrow and Title

money and house

Select the escrow and title companies recommended by the listing broker. Generally title is chosen by the seller (since they pay for the insurance coverage guaranteeing a clear title) while escrow is by the buyer’s agent. In a multiple offer situation, you will want to pick the escrow recommended by the owner’s agent.

#8. Write the right “love letter” to the sellerhappy 2

When touring a property, if the owners still live in the home, gather clues of the seller’s lifestyle. By playing detective, you may find out what you have in common with the owners. I would suggest you or your agent use these in a letter thanking agent and seller to review your offer and laying out the advantages of working with you, your agent. You need to show how smooth the process will go. Be careful however not to disclose some personal information that may not play to your advantage. Be careful with your words.

#9. Waive or shorten timelines

Each contingency (inspection, financing, title,…) are ways for you to get out of the transaction once your offer has been accepted. The sellers will want in his/her offer selection to pick the buyers with the shortest contingency period especially the inspection. Know that any timeline with 5 days or less don’t count weekends.

#10. Learn the seller’s preferred way to receive the offer

Have your agent call the listing broker to understand his clients’ preference while receiving offers and follow their instructions.

#11. Be fast to get that offer signed aroundhandshake-hero-1

Be ready to initial or sign any changes quickly to make sure that another better offer doesn’t reach the seller before you have mutual acceptance.

#12. Be willing to do what it takes (within reason) to win the sellers’ acceptance

If you feel deep down that this is the right house for you, make sure to write the cleanest and best offer possible, you will have no regret later on.

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Happy offer writing and best of luck or as the French would say “Bonne chance”!

 

 

A quick U.S real estate forecast for 2016

We are all curious about 2016 and what it will bring us especially for all of you thinking about buying your next home or selling your current residence. Here are some pointers gathered along real estate seminars and economist predictions.

seattle fog

Median Sold Prices – Home prices will continue to increase nationally by single digit numbers, between 5-6%. Urban metro areas in high demand by Millennials will see an increase in the double digits. According to the National Association of REALTORS®, the third quarter national median price for existing single family homes was $229,000, which represented a 5.5% increase over third quarter 2014. There are still areas of very high demand and low inventory and this will continue until new home starts can catch up to the lack of supply.

Housing Inventory – The inventory shortage was caused by the cumulative impact of home builders not being in the market for well over five years. This severe shortage fueled the demand.  We are still not back to our level needed to sustain regular inventory rates.  This probably won’t happen until well into 2017. It is likely that more buyers will be entering the market for a home. Improved job markets bring more buyers into the market and according to the Bureau of Labor Statistics, nationally the unemployment rate stands at 5.0% for November, 2015 – the lowest it has been since April, 2008.  We will continue to see inventory challenges until new construction picks up even further.

Homeownership Rate – The homeownership rate (the percentage of Americans who own their own home) is near the 20-year low of 63.7% in the third quarter of 2015, falling from the all-time high of 69.2% in 2004. The low was 63.4% reached during second quarter of this year. I predict this number will be even lower in 2016 due to the lack of inventory and increasing home prices due to the inventory shortages. The steady decline in the homeownership rate is partially the result of tight lending conditions and a historically low share of first-time buyers.

 

Housing Starts – The current pace of home construction is dangerously low at about 60% of the norm. New construction did not pick up enough in 2015 to address the housing inventory problem. Housing starts are well below the 50 year average of 1.5 million starts per year. Two big reasons for the slow recovery in new construction are the difficulty in obtaining construction loans and construction labor shortage. It is highly probable that housing starts to increase in 2016 as builders and investors are able to participate in the market because of the rise in house prices. New home starts should increase by at least 20% in 2016.

Interest rates – The improving economy is a sure sign that interest rates will increase in 2016. The new rates will balance job growth and higher inflation rates. The Federal Reserve increased interest rates a quarter of a percentage point at its December meeting.  The federal fund rate has a significant effect on mortgage rates. The federal funds rate had remained near zero since December 2008 and the Reserve had not raised rates in almost a decade.  The Federal Reserve will keep an eye on jobs, the economy, and inflation before determining action on additional rate hikes. However, the 30 year fixed rate mortgage rate are expected to reach 5.5% by the end of 2016.

Second Homes Market – Second home sales will continue to see a strong increase in 2016 due to the passing of wealth from the Silent Generation (those born 1925 – 1945) to Baby Boomers (those born between 1946 and 1964) and due to Baby Boomers buying multi-generational homes and vacation homes.

Rental Market for Owners/Investors – Due to dropping homeownership rates, the total rental income for investors has more than tripled over the past seven years, growing by an astonishing 240% from 2007 to today. The Census Bureau reports that median asking rent has increased 30.6% comparing third quarter 2005 to third quarter 2015 (as more rental households bring more rent). As Millennials enter the job market and strike out from their parent’s homes on their own, renting is usually the first step. There is high demand for rentals in urban locations where there is appealing job activity for millennials. High demand areas will continue to see double digit increases in rent. I predict rental demand in urban centers will continue to be in high demand in 2016. Source: http://www.census.gov/housing/hvs/files/currenthvspress.pdf  http://www.census.gov/housing/hvs/data/histtabs.html

 I am excited for what 2016 has in store! For additional information and predictions on our local market. Please call or text: (206) 214-8499 or send me an email to Veronique@belleresidence.com.

Mt. Rainier