Last week I was contacted by a reporter from KPLU, the Seattle affiliate for National Public Radio, wondering if I would sit down with her and talk about how many banks have elected to temporarily suspend their foreclosure process. So last Thursday she showed up at our offices, microphone in hand, and we spent the next 90 minutes discussing this brave new world of real estate.

90 minutes of conversation with three different agents (Dennis Pearce, John McCants and myself) was edited down to 4 minutes, and a good share of that was split with Jillayne Schlicke – real estate and mortgage educator extraordinaire, and Richard Hagar – a Seattle real estate appraiser. The piece aired nationally on the “Weekend Edition” on NPR this past Sunday.

I think that the initial pitch for the story was an investigative report as to how the suspension of foreclosures from big banks like Bank of America, JP Morgan Chase, and GMAC was effecting the day-to-day operation of real estate businesses like ours. As a real estate team that services short sale, bank-owned, resale, new construction, and auction properties, the suspensions most greatly affected our auction business. John is quoted in the report discussing this – saying that on average we’ve been seeing about 150 homes going to trustee’s sale every Friday in Snohomish County. There was about 75 scheduled for auction last week, and most of these were postponed. In King County we’ve been seeing about 300 properties going to auction every Friday, and their numbers were halved as well.

We also noticed a void in our bank-owned business, as we didn’t receive any listing assignments (which are usually awarded the week after foreclosure) and our BPO (broker price opinions – much like an appraisal or CMA – used to establish market value for the banks as they decide what to do with a property in the foreclosure process) orders were down about 95%.

There is already news of these foreclosure suspensions lifting, which – as oddly as it sounds – is good news. Foreclosure is a natural way of the market correcting itself, and if we suspend foreclosures, then we suspend the market’s ability to recover. The foreclosure industry is now an essential part of real estate, and it’s helping to stabilize a sputtering economy. Banks hire companies to manage these properties, who hire contractors and landscapers to service the properties and real estate agents to sell them. On the auction side there are trustees to handle the foreclosure process, investors purchasing the properties at auction and hiring contractors and real estate agents to ready the properties for a quick sale. All of these properties end up contributing to the title, escrow, mortgage and homeowner’s insurance businesses.

In preparation for the interview I pulled some statistics, just for a better understanding of how much market share bank-involved properties were taking up in our current market (NOTE: by bank-involved I mean short sale or bank-owned listings – that the property can’t be sold without a strong level of involvement from the bank). What I found is that in the 30 days prior to October 8th (when many banks announced that they were suspending foreclosures), bank-involved properties made up 33% of the sold inventory in Snohomish County and 22% in King County. My stat didn’t make the radio piece, but you can see how even a 30 day foreclosure suspension could affect our market.

I wish that they could have devoted more time to discussing the issue at length, but I’m happy that Pickett Street got it’s share of four minutes of fame. You can listen to the piece or read the transcript at NPR.org, or you can use the player below.

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Tags: BPO, Jesse, John, Pickett Street, radio, REO, short sale

There was a time when real estate agents helped people buy and sell homes. Then the market changed, and now we do a lot more counseling, some financial advising, negotiating short sales with banks, and on the flip side – evaluating properties for banks as they liquidate their foreclosed assets. Regarding the latter, banks ask real estate agents to complete BPOs (broker price opinions), to give them an understanding of the local market and an evaluation of the property’s value. Banks do not pay agents well for this service, but agents (including myself) do them in the hopes of listing bank-owned properties.

When completing BPOs, I have enough experience that if I’m familiar with the neighborhood I have an intuitive idea what the price of the home should be before I go about the work of proving it. My intuition is not enough for the banks though, so I have to complete a fairly rigorous form that goes over statistical averages for the neighborhood of the home that I’m evaluating.

I hate BPOs – but the truth is, doing them on a regular basis makes me a better agent. It’s easy to take what’s true for a majority of neighborhoods and assign the same market symptoms to every neighborhood. For instance, when evaluating most markets in Snohomish County, it’s easy to say that home values dropped 8-12% in the last year, or almost 1% every month. Here’s a graph to prove it (click on graph to load full scale PDF report):

If it’s a little small to read, here’s what you need to know. For all residential properties in Snohomish County, the average price has dropped 7% and the median price has dropped 8%. I’m not a statistician, and better people than I can explain the variables involved in a comparison like this, but the sake of brevity, let’s accept these values and move on (smile inflected).

So now, if you’re a homeowner in Snohomish County, I’ve just taken the wind out of your sails. Most people are hoping that we’re at the bottom, but with drops like these, that doesn’t seem to be the case. I’ve been saying for a long time that I don’t think that we’re at the bottom of anything, and until we get rid of the short sale and bank-owned inventory, it could be awhile until will do. But I would be in error if I led people to believe that this is the case everywhere.

Case in point: I recently had to complete BPOs in the Silver Lake / Silver Firs / Gold Creek / Cathcart neighborhoods, and I have two upcoming listings in these neighborhoods, and what I found was surprising (click on graph to load PDF report):

Compared to a year ago, the average price of homes in this neighborhood went up 7%, and the median price of homes sold only came down 1%. I do quite a few BPOs, and as I mentioned, I’d grown accustomed to seeing depreciation in almost every  neighborhood in Snohomish County. I’ve run these stats on different sizes and styles of homes, but the emerging trend that I see in these neighborhoods (Silver Lake, Silver Firs, Gold Creek & Cathcart) is that maybe – just maybe – we’re seeing signs of a stabilizing market.

No one will know for sure for several months, and just because we see some markets stabilizing doesn’t mean that the trend will continue. No one really knows what the impact of the tax credit expiring (eligible buyers had to be under contract by April 30th) means for the real estate market, but I can tell you that just about every neighborhood saw unusually high sales activity in March and April, and based on the trend for May thus far, activity will probably fall far short of those numbers. Even then there’s a trend – if you’re a homeowner in the Silver Lake, Silver Firs, Gold Creek & Cathcart neighborhoods, or if you’re a home buyer considering how much a neighborhood effects values, consider these graphs (again, click on either graph for a full PDF report). Let’s look at all of Snohomish County first:

So the red bar is the inventory of homes available (which is down 2% from last year), the blue bar is the number of homes under contract (up 33%) and the green bar is the number of homes sold (up 36%). Good news right? Anytime supply drops and demand goes up it’s a good thing.

Now consider the Silver Lake, Silver Firs, Gold Creek & Cathcart neighborhoods:

In comparison, available inventory in these neighborhoods dropped 1%, homes under contract rose 292%, and homes sold went up 88%!! So while it seems obvious that the expiration of the tax credit inspired home buyers to get in the game, it seems as though these areas are generating more sales activity than surrounding areas.

Overall, this is good news. I’ve gotten so used to seeing negative trends in our market that it took me a little while to recognize a positive trend. Do I think that that this means that we’re through the worst of it? No. Can I pause and enjoy the respite that a positive trend brings? Yes.

We’ll be doing further statistical posts regarding neighborhoods in Snohomish and King Counties, but if you need an analysis of your neighborhood in the meantime, please let me know.

Tags: BPO, Cathcart, Gold Creek, Silver Firs, Silver Lake, Snohomish County, stats