A Tale of Two First-Time Home Buyers

 

Have you had dreams of owning a home or know someone that does?  Jumping into the market as a first-time home buyer can be intimidating, especially within the wild ride of the Greater Seattle market; but there is hope! In an effort to illustrate the reality for first-time buyers in today’s market, our office got together and identified several sets of buyers who recently found success in today’s market and asked them to share their stories. We think this is timely because it is the time of year that we see a surge in inventory, which gives buyers more selection and opportunity. We have two stories to share below, but before we dive into those let’s defy some first-time home buyer myths.

First, many people think it is necessary to have a 20% down payment saved in order to make their first purchase. That is simply not true. While a 20% down payment can help make you more competitive and naturally lowers your monthly payment, it is not the only option. There are loan programs with down payments as low as 3%. Nationally, in March the average down payment for all loans was 10%. For first-timers it was 6% and repeat buyers it was 14%.

Second, expectations around credit scores can use some clarification as well. In March, the average credit score for all loans was 722. For Conventional loans it was 742 and for FHA it was 677.  If your credit needs some work, contact me and I can put you in touch with one of my preferred lenders that can help with credit repair. There is hope, as these numbers are just the average. You’d be surprised that you don’t have to have perfect credit to get the process started.

Lastly, the cost to be a renter is high, and the return on your investment is nothing. Recently, Rent.com did a survey of landlords and 88% said they planned to raise their rents in the next 12 months. In the same survey, 53% said they’d rather place a new tenant with a higher rent versus renegotiate and renew with a current tenant.  This sounds expensive and unstable. Owning leads to building wealth and putting down permanent roots.

Now that we’ve gained some clarity on what it takes to qualify in today’s market, let’s jump into these two honest, yet heartwarming local first-time home buyer stories.

 

Three Teenagers, One Bathroom, No More

A happy family of five just moved in to this house in mid-May. Two hard working parents, Brandy and Juan, with three teenagers were renting a 3-bedroom, 1-bath rambler in Edmonds and needed more space. It was time to make a move, and they had saved up a 3% down payment for a new home. Their budget was $400,000.

The first step in the home buying process was sitting down with their agent for the initial buyer consultation. This is where they discussed market conditions, desired features such as bedrooms, bathrooms and garage, and their budget. This lead them to explore which locations had the inventory that met their needs in order to stay within their budget. They had to marry these three key points – we like to call this the Triangle of Buyer Clarity. They then identified a few workable locations that had inventory which supported their desired features and their budget and went for it. This upfront research and partnership with their agent lead to Brandy and Juan finding success rather quickly, saving them money in an appreciating market, and a whole lot of strife.

They did this and ultimately bought a great house in Marysville which fit their budget, afforded them the features they desired, and still provided a manageable commute into Lynnwood. Their mortgage payment is higher than their rental rate, but is relative to the size of their new home and their investment. Not to mention, they are now on the equity-building train and don’t have to worry about a landlord displacing them. Their monthly mortgage payment is fixed with an awesome low interest rate, and they are super happy to have more than one bathroom for their teenagers.

 

From North Seattle to West Seattle

First, how cool is this house? Super cool! That’s just how Paul and Ange feel about their newly purchased home in the Highland Park neighborhood of West Seattle. They just closed in early April and have already attended two neighborhood BBQ’s, received gifts from their new neighbors, discovered new parks and restaurants and, wait for it…shortened their commute.

Paul described his new neighborhood, Highland Park, as “magical.” Previously, Paul and Ange were renting in Wedgwood for six years and loved it there. So much that they could not imagine living anywhere else. When they started their home search in late 2017, they kept to strict search criteria of North Seattle because that is what they knew and it was comfortable. After making two offers and not prevailing because they were getting beat out on price, their agent suggested West Seattle as a more affordable option. The ‘price’ corner of the Triangle of Buyer Clarity was making itself known as a challenge in North Seattle, so it was time to reconvene.  They sat down with their agent and evaluated the market conditions in West Seattle compared to North Seattle and applied them to their feature list and budget, and voilà: West Seattle was calling their names. You see, they wanted a more turn-key home, and the homes they were encountering in their price range in North Seattle needed a lot of work.

They went out on a limb and traveled over the bridge to start looking at homes. They quickly saw the difference – the homes they were interested in were not, as Paul said, “scary”!  The anticipated repairs they would have to make to the homes they were able to afford in North Seattle were daunting and unexciting. They felt much more at ease with the features that the West Seattle homes provided within their price range. They just needed to get comfortable with the idea of moving to a different community.

When they found the house featured above, the leap of faith to West Seattle started to take shape. They prepped a strong offer, did their due diligence, and believe it or not, secured the home in a multiple-offer situation at $805,000 – which was not the highest price offered! They listened to their agent and wrote an offer with very strong terms as well as a very well-researched price.  Their agent kept in close contact with the listing agent and the Sellers chose their offer due to all of these factors.

Since moving in almost two months ago, they find themselves in a state of excitement and discovery every day. The community has been welcoming and conversations with neighbors and the random stranger at the grocery store come easily. Paul has observed a strong sense of curiosity within his new community as people are new to the area and are encouraged to build relationships and make discoveries.

In the end, Paul and Ange remained within their price range, bought a home with all the features they wanted, but made what seemed to be at the time, a compromise on location. That compromise ended up being, as they put it, magical! They have never looked back to Wegdwood with regret, only excitement over what their new neighborhood might bring.

 


 

The point of these two stories is to debunk the sentiment we hear from time to time, that first-time home buyers cannot find success in our market. With a well-laid-out plan strategically constructed by the agent and client, we are seeing many happy stories for first-timers. The end result is putting these new homeowners on the path to building wealth, growing thriving communities, and making their house their home.

If you or someone you know has dreamed about buying their first home, please reach out. It is our goal to help identify the opportunities that are available, the strategies that find success, and to educate along the way.

 

 


Posted on May 23, 2018 at 12:59 pm
Windermere Real Estate North | Posted in Local Market Analysis | Tagged , , , , , , , , , , , , , , ,

Does it make more sense to rent or own?

The current break-even horizon* in the Seattle metro area is 1.6 years!

*The amount of time you need to own your home in order for owning to be a superior financial decision.

 

With rising rental rates, historically low interest rates, and home prices on the rise, the advantage of buying vs. renting is becoming clearer each month.

In fact, Seattle has seen some of the sharpest rent hikes in the country over the last year! Snohomish County has seen a huge increase in apartment growth and rising rental rates as well. There are several factors to consider that will lead you to make the best decision for your lifestyle and your financial bottom line. Zillow Research has determined the break-even point for renting vs. buying in our metro area. In other words, the amount of time you need to own your home in order for owning to be a superior financial decision. Currently in Seattle the break-even point is 1.6 years – that is quick! What is so great about every month that ticks away thereafter is that your nest egg is building in value.

 

We are happy to help you or someone you know assess your options; please contact us anytime.

 

These assumptions are based on a home buyer purchasing a home with a 30-year, fixed-rate mortgage and a 20 percent down payment; and a renter earning five percent annually on investments in the stock market.

 

 

 


Posted on May 3, 2018 at 12:26 pm
Windermere Real Estate North | Posted in Local Market Analysis | Tagged , , , , , , , , , , , ,

Veggie planting – it’s not too late!

It’s not too late! If you’re thinking about planting some fresh veggies but haven’t started yet, you still have time to get things in the ground for a late summer/early fall harvest. On average, the Puget Sound’s frost-free growing season is mid-March through mid-November, so with a little knowledge of when and how to start things, you can still see a bountiful harvest this year.

Some plants can be direct seeded into your garden, while others should be started indoors before being transplanted to your garden space. Deciding what to grow is the fun part! Plant what you like to eat, keeping in mind that some plants do better in our area than others.

Broccoli is arguably one of the most productive veggies you can grow in this area, although it can be vulnerable to root maggots and aphids. Giant Italian Parsley is easy to grow, highly productive, and expensive in the grocery store. Leeks are another that can be costly to buy in the store but trouble-free to grow in your own small space. Chard, Kale, Lettuce and Arugula are all full of vitamins and great for Northwest gardens. Carrots, Snap Peas, Snap Beans, Tomatoes and Basil all taste amazing fresh from the garden and grow relatively well in this area.

Check out the great resources at Garden.org for a full list of when to plant all these vegetables and more. They have detailed timelines for both spring and fall gardening; as well as information on transplanting seedlings vs. direct-sowing seeds.


Posted on May 3, 2018 at 12:25 pm
Windermere Real Estate North | Posted in Living |

Why we are NOT headed for another housing bubble

Double-digit price appreciation has taken place for over 3 years now, so prices are up. Way up. In fact, in just the last year we have seen prices rise 14% year-over-year. When talking with people about our real estate market, the conversation often involves the question, “are we headed toward a bubble?” We get asked this question often, and it is understandable. With the Great Recession not too far back in our rear-view mirror, the fear that surrounds the bottom dropping out in our home values is real. The large price gains might seem familiar to the gains of the previous up market of 2004-2007, but the environment is much different, and that is why we are not headed toward a housing collapse.

Lending Requirements & Down Payments
Previous lending practices allowed people to get into homes with high debt-to-income ratios, low credit scores, risky loan programs, and undocumented incomes. They called this sub-prime lending. This led to the housing bubble bursting 10 years ago – because people received mortgages they were not equipped to handle. Borrowers were not properly qualified for their monthly payments, and with minimal down payments they had no skin in the game. There were also a ton of adjustable rate mortgages and interest-only loans, which created negative equity positions. In July 2007, the sub-prime loan products disappeared and literally became history overnight. This eliminated a large part of the buyer pool creating over supply, not to mention the foreclosures that followed due to these ill-equipped homeowners walking away. The combination of these two factors caused prices to plummet.

Conversely, in March of this year, the average credit score for an approved conventional loan according to Ellie Mae was 752. Banks are scrutinizing their borrowers much more thoroughly than in the past. Credit scores are only the start; solid documentation of employment, assets, and debt are all passed through strict underwriting standards before closing. During the days of sub-prime lending, banks were funding loans with scores as low as 560! This, coupled with many zero-down loan programs and the risky terms mentioned above, left many new homeowners with little to no equity. When you have little or no equity it is very easy to bail.

In addition to heartier credit scores, down payments have increased significantly. According to Attom Data Solutions the average down payment is 18%. To put this in perspective, the median price in Seattle Metro in the first quarter of 2018 was $775,000. 18% of that is $139,500! There is a marked difference in the connection to one’s investment with such a large amount on the line versus the common 0% down loans of the sub-prime era. When people have high equity levels they are not likely to abandon their home or miss payments.

Our Thriving Local Economy, Job Creation & Californians
According to Matthew Gardner, Windermere’s Chief Economist, it is forecasted that there will be 46,000 more jobs in the Seattle Metro area in 2018. This has created high numbers of residual migration into our area from other states. In 2016 there were 50,000 people that moved here, and 47,000 in 2017. Many of these new Washingtonians are former Californians, specifically from the Bay Area. Unbelievably, our prices are attractive to this group, as they can take a similar tech job here and make the same income with a lower cost of living. If untethered and up for a move, it’s a no-brainer.

The most influential factor that has led the run on prices has been low inventory levels coupled with high housing demand. It’s simply the concept of supply and demand. The growth of companies like Amazon, Google, and Facebook in our area has created increased demand, especially for homes closer to job centers resulting in shorter commutes. When you have increased demand and not enough homes to absorb the buyers, prices go up. Over the last three years we have easily seen a 10%+ increase in prices year-over-year. That is above the norm, and will slow down once inventory increases. That slowdown will be welcomed and it will not be a collapse in values or a bubble bursting.

Interest Rates
Interest rates are increasing, and it is predicted they will reach close to 4.95% by the end of the year. This will naturally curtail price growth because it will not be as cheap to borrow money, which will cause buyers to temper their pricing ceilings. Bear in mind, that an interest rate of 4.95% is still historically low, we’ve just been incredibly fortunate to be able to secure long term loans with minimal debt service. The average interest rate over the last 30 years is 7%.

We understand that the recent increase in home prices has been big and that it might remind you of the previous up market before the crash. Hopefully digging into the topics above has shed some light on how it is different. We always welcome the opportunity to have conversations about these hot topics and discern how they relate to you. As always, it is our goal to help keep our clients informed and empower strong decisions. Please let us know if we can answer any questions or help you or anyone you know with their real estate needs.

 


Posted on May 1, 2018 at 11:30 am
Windermere Real Estate North | Posted in Local Market Analysis | Tagged , , , , , , , , , , , , , ,

Quarterly Reports: Q1 North Snohomish

Q1: January 1 – March 31, 2018

It is the time of year when our market starts to take off. Spring is here and we are starting to see seasonal increases in inventory.

In fact, there was a 54% increase in new listings in March compared to February. That increase was matched by a 50% rise in pending sales, illustrating very strong demand for housing in your area. Last month, the average list-to-sale price ratio was 100%, and average days on market was 35 days. We ended the quarter with 0.7 months of inventory – the lowest level yet. More inventory would be absorbed by happy buyers looking for more selection and would help temper price growth, which is up 12% year-over-year.

North Snohomish County is one of the most affordable markets in the area. In fact, the median price in March was 28% higher in south Snohomish County. Buyers are migrating to the area, especially if they don’t have to commute into the city. Sellers are enjoying amazing returns due to this phenomenon, and buyers are securing mortgages with minor debt service due to low interest rates. This is a very strong seller’s market, but buyers who are securing a home are already enjoying appreciation in equity.

This is only a snapshot of the trends in north Snohomish County; please contact us if you would like further explanation of how the latest trends relate to you.

 

 


Posted on April 16, 2018 at 12:17 pm
Windermere Real Estate North | Posted in Local Market Analysis, Quarterly Reports |

Quarterly Market Trends: Q1 South Snohomish

Q1: January 1 – March 31, 2018

It is the time of year when our market starts to take off. Spring is here and we are starting to see seasonal increases in inventory.

In fact, there was a 47% increase in new listings in March compared to February. That increase was matched by a 48% rise in pending sales, illustrating very strong demand for housing in your area. Last month, the average list-to-sale price ratio (how the sale price relates to the list price) was 103%, indicating that multiple offers were the norm. We ended the quarter with 0.5 months of inventory – the lowest level yet. More inventory would be absorbed by happy buyers looking for more selection and would help temper price growth, which is up 15% year-over-year.

South Snohomish County real estate has been a hot spot due to reasonable commute times and overall affordability compared to “in-city” real estate. In fact, the median price in March was 47% higher in Seattle Metro. Sellers are enjoying amazing returns due to this phenomenon, and buyers are securing mortgages with minor debt service due to low interest rates. This is a very strong seller’s market, but buyers who are securing a home are already enjoying appreciation in equity.

This is only a snapshot of the trends in south Snohomish County; please contact us if you would like further explanation of how the latest trends relate to you.

 

 


Posted on April 16, 2018 at 12:15 pm
Windermere Real Estate North | Posted in Local Market Analysis, Quarterly Reports |

Quarterly Market Trends: Q1 North King County

Q1: January 1 – March 31, 2018

It is the time of year when our market starts to take off. Spring is here and we are starting to see seasonal increases in inventory.

In fact, there was a 55% increase in new listings in March compared to February. That increase was followed by a 41% rise in pending sales, illustrating very strong demand for housing in your area. Last month, the average list-to-sale price ratio (how the sale price relates to the list price) was 106%, indicating that multiple offers were the norm. We ended the quarter with 0.6 months of inventory based on pending sales. More inventory would be absorbed by happy buyers looking for more selection and would help temper price growth, which is up 14% year-over-year.

North King County real estate has a very high premium due to close-in commute times and desirable neighborhoods. In fact, the median price in March was $808,000, up 4% from the month prior! Sellers are enjoying amazing returns due to this phenomenon, and buyers are securing mortgages with minor debt service due to low interest rates. This is a very strong seller’s market, but buyers who are securing a home are already enjoying appreciation in equity.

This is only a snapshot of the trends in north King County; please contact us if you would like further explanation of how the latest trends relate to you.

 

 


Posted on April 16, 2018 at 12:14 pm
Windermere Real Estate North | Posted in Local Market Analysis, Quarterly Reports |

Quarterly Market Trends: Q1 Eastside

Q1: January 1 – March 31, 2018

It is the time of year when our market starts to take off. Spring is here and we are starting to see seasonal increases in inventory.

In fact, there was a 54% increase in new listings in March compared to February. That increase was topped by a 58% rise in pending sales, illustrating very strong demand for housing on the Eastside. Last month, the average list-to-sale price ratio (how the sale price relates to the list price) was 103%, indicating that multiple offers were the norm. We ended the quarter with 0.7 months of inventory – the lowest level yet. More inventory would be absorbed by happy buyers looking for more selection and would help temper price growth, which is up 14% year-over-year.

Eastside real estate has a very high premium due to close-in commute times and desirable neighborhoods. In fact, the median price in March was $927,000! Sellers are enjoying amazing returns due to this phenomenon, and buyers are securing mortgages with minor debt service due to low interest rates. This is a very strong seller’s market, but buyers who are securing a home are already enjoying appreciation in equity.

This is only a snapshot of the trends on the Eastside area; please contact us if you would like further explanation of how the latest trends relate to you.

 

 


Posted on April 16, 2018 at 12:11 pm
Windermere Real Estate North | Posted in Local Market Analysis, Quarterly Reports |

Quarterly Market Trends: Q1 Seattle Metro

Q1: January 1 – March 31, 2018

It is the time of year when our market starts to take off. Spring is here and we are starting to see seasonal increases in inventory.

In fact, there was a 69% increase in new listings in March compared to February. That increase was followed by a 48% rise in pending sales, illustrating very strong demand for housing in your area. Last month, the average list-to-sale price ratio (how the sale price relates to the list price) was 105%, indicating that multiple offers were the norm. We ended the quarter with 0.6 months of inventory based on pending sales. More inventory would be absorbed by happy buyers looking for more selection and would help temper price growth, which is up 16% year-over-year.

Seattle Metro real estate has a very high premium due to close-in commute times and vibrant neighborhoods. In fact, the median price in March was $800,000, up 5% from the month prior! Sellers are enjoying amazing returns due to this phenomenon, and buyers are securing mortgages with minor debt service due to low interest rates. This is a very strong seller’s market, but buyers who are securing a home are already enjoying appreciation in equity.

This is only a snapshot of the trends in the Seattle Metro area; please contact us if you would like further explanation of how the latest trends relate to you.

 

 

 


Posted on April 16, 2018 at 12:08 pm
Windermere Real Estate North | Posted in Local Market Analysis, Quarterly Reports |

Quarterly Market Trends: Q1 South King County

Q1: January 1 – March 31, 2018

It is the time of year when our market starts to take off. Spring is here and we are starting to see seasonal increases in inventory.

In fact, there was a 47% increase in new listings in March compared to February. That increase was matched by a 48% rise in pending sales, illustrating very strong demand for housing in south King County. Last month, the average list-to-sale price ratio (how the sale price relates to the list price) was 101%, indicating that multiple offers were the norm. We ended the quarter with 0.7 months of inventory – the lowest level yet. More inventory would be absorbed by happy buyers looking for more selection and would help to temper price growth, which is up 12% year-over-year.

South King County real estate has been a hot spot due to reasonable commute times and overall affordability compared to “in-city” real estate. In fact, the median price in March was 78% higher in Seattle Metro. Sellers are enjoying amazing returns due to this phenomenon, and buyers are securing mortgages with minor debt service due to low interest rates. This is a very strong seller’s market, but buyers who are securing a home are already enjoying appreciation in equity.

This is only a snapshot of the trends in south King County; please contact us if you would like further explanation of how the latest trends relate to you.

 

 


Posted on April 16, 2018 at 12:01 pm
Windermere Real Estate North | Posted in Local Market Analysis, Quarterly Reports |