I attended an annual private function on Camano Island yesterday, where I soaked up the rain with an extended family of clients and friends. As is the case with almost anything I attend lately, most of the questions I fielded were about the local housing market. One client was looking for a part-time assistant, and mentioned that a majority of applicants were real estate agents who needed a steady paycheck. A cousin of one of my friends asked me about foreclosures and short sale opportunities. But overwhelmingly, most were curious when I thought this current slump might be over. In the face of a volatile week in the stock market, and with the government bailout of Lehman Brothers and AIG, I stunned almost all of them when I said that all of the bad news is an indication of forthcoming stability in the real estate market. If things are going to get worse before they get better (as so many pundits like to say), then I say let’s look for the worst and we’ll see markers for coming improvements. Here are a few indications why I think we may be seeing the worst:
Foreclosures Rise Locally
Excuse me while I put on my rose-colored glasses. Ok – seriously, this isn’t good news for a lot of people. A recent article published in the Everett Herald states that foreclosures in Washington State went up 64% in August (year over year), while the national average was only up 27%. overall. 64% is a big number, but when you look at the numbers in perspective the news doesn’t seem as alarming. In Washington the number of households that went into foreclosure in July was 1 in every 856 households. In August it rose to 1 in every 805 households, which is almost half of the national average (1 in every 416. For comparisons sake, Nevada’s foreclosure rate is 1 in every 91!).
Considering this, I offer up this quote from the source of the Herald Article:
“In August the total number of U.S. properties that received foreclosure filings as well as the national foreclosure rate were both the highest we’ve seen in any month since we began issuing our report in January 2005; however, the annual increase of 27 percent was actually substantially lower than in previous months this year, when it was hovering around 50 to 65 percent,” said James J. Saccacio, chief executive officer of RealtyTrac. “The lower annual percentage increase this month is due to a big spike in activity last August — particularly in default activity. Over the past few months we’ve seen annual increases in default activity and auction activity moderating, and that trend continued in August…”
In short, August saw a sharp spike in foreclosure activity – the worst spike since they started keeping track of foreclosure filings. Take now the perspective of Jason Bloom, a local lender also quoted in the article:
So, how much longer will foreclosure rates keep going up? Bloom said he’s talked to big national banks that are seeing a leveling out of homeowners in trouble. And unless home values drop significantly more here, Bloom doesn’t foresee a huge wave of new foreclosures hitting Washington.
Still waiting for the good news? Consider this the trickle down effect of real estate – historically our local market has been a little slow to respond to national trends – both positive and negative trends. I believe that when we see the real estate trends reverse in Florida, California, Arizona and Neveda we’ll start to see a reflection of those changes here as well. Which is why I think it’s only fair to point out that…
Sales are way up in California
Quoting from an article entitled “California home sales surge as prices plummet”:
Home sales in California surged 13.6 percent in August as a flood of foreclosures drove down prices…46.9% of all homes sold last month were foreclosed properties.
California, Florida, Arizona and Nevada account for more than half of the nation’s foreclosures, so an indication of increased sales activity in any of these states bodes well for not only the national real estate market, but the stabilization of our local market as well.
Last but not least…
Prices & Rates are down
From another recent article published in the Everett Herald:
Statistics released Tuesday by the Northwest Multiple Listing Service showed that prices for single-family homes continued to fall in the Puget Sound region during August. In Snohomish County, the median price for houses was $339,950 last month, a 9.35 percent drop from a year ago…The price drop for homes, coupled with still rising inventory and slow sales, have put buyers in a strong position.
Prices are lower than they were a year ago, and if there are signs that the national real estate market might be shoring up (especially in the hardest hit states like California), then we can’t expect our prices to stay this low for long. Couple the low prices with some of the lowest rates that we’ve seen historically, and you have the makings of a perfect storm for homebuyers. Those that realize this unique opportunity will start buying homes, and when homes start selling, inventory wanes and prices go up.
Which is why the latest round of bad news is good news for the local real estate market 🙂 If you’re thinking about buying, don’t wait until it’s too late. We haven’t seen an opportunity like this within the last decade, and we’re unlikely to see another quite like it for another ten years.