Comments on: West Linn Real Estate Market Activity — November 23-29, 2009 http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/ News, Statistics, and Commentary about West Linn Oregon Real Estate Wed, 23 Jun 2010 15:10:28 +0000 hourly 1 http://wordpress.org/?v=3.0 By: David http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-865 David Sat, 05 Dec 2009 22:41:14 +0000 http://www.move2westlinn.com/?p=1146#comment-865 Ron, I'm bullish on housing at the low end. And bearish at the high end. I think the starter home market that's priced around 350K will do well. It may not appreciate as much but it'll hold its own. A house is a place to live, not a get rich quick scheme. So I think we have bottomed at the under 350K homes. The high end that's priced over 400K and beyond I think will suffer. I'm bearish in that market. David Ron, I’m bullish on housing at the low end. And bearish at the high end. I think the starter home market that’s priced around 350K will do well. It may not appreciate as much but it’ll hold its own.

A house is a place to live, not a get rich quick scheme. So I think we have bottomed at the under 350K homes.

The high end that’s priced over 400K and beyond I think will suffer. I’m bearish in that market.

David

]]> By: dj http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-864 dj Fri, 04 Dec 2009 23:47:21 +0000 http://www.move2westlinn.com/?p=1146#comment-864 Ron, thank you so much for being very forthcoming with this information. It info like this that makes your site so valuable to your readers, and we greatly appreciate it your and Jody's efforts and transparency. I too, was surprised to see such activity in the $500K+ range. 72% of sales are <$500K, but still, the $500K+ market isn't as bad as I thought. Your data proves that there are indeed buyers out there, but I would argue that those buyers are still looking for a good deal relative to fair market value. I think in the <$500K range, buyers have to pay fair market value because there are much more of them (72%), so I think this area of the market has stabilized for now. But the $500K+ market is still in flux. Coming back to Michele's comment about her home competing with foreclosures and short sales - Ron, do you have any data you can share on how many of the homes in each band that sold were short-sale/REO properties ? Ron, thank you so much for being very forthcoming with this information. It info like this that makes your site so valuable to your readers, and we greatly appreciate it your and Jody’s efforts and transparency.

I too, was surprised to see such activity in the $500K+ range. 72% of sales are <$500K, but still, the $500K+ market isn't as bad as I thought. Your data proves that there are indeed buyers out there, but I would argue that those buyers are still looking for a good deal relative to fair market value. I think in the <$500K range, buyers have to pay fair market value because there are much more of them (72%), so I think this area of the market has stabilized for now. But the $500K+ market is still in flux.

Coming back to Michele's comment about her home competing with foreclosures and short sales – Ron, do you have any data you can share on how many of the homes in each band that sold were short-sale/REO properties ?

]]> By: Stuart http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-861 Stuart Fri, 04 Dec 2009 15:27:06 +0000 http://www.move2westlinn.com/?p=1146#comment-861 Thanks Ron! That's better than I had expected in the $500K - $600K range. Thanks Ron! That’s better than I had expected in the $500K – $600K range.

]]> By: Ron Ares http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-860 Ron Ares Fri, 04 Dec 2009 14:49:51 +0000 http://www.move2westlinn.com/?p=1146#comment-860 Year to date, the market has sold 300 single-family homes. Here's a breakdown: $100K - $200K: 14 homes or 5% $200K - $300K: 65 homes or 22% $300K - $400K: 68 homes or 23% $400K - $500K: 70 homes or 23% $500K - $600K: 38 homes or 13% $600K - $700K: 23 homes or 8% $700K +: 22 homes or 7% So, price points above $500,000 account for 28% of all West Linn single-family home sales. Also, seven $1 million+ homes have sold this year. Year to date, the market has sold 300 single-family homes. Here’s a breakdown:

$100K – $200K: 14 homes or 5%
$200K – $300K: 65 homes or 22%
$300K – $400K: 68 homes or 23%
$400K – $500K: 70 homes or 23%
$500K – $600K: 38 homes or 13%
$600K – $700K: 23 homes or 8%
$700K +: 22 homes or 7%

So, price points above $500,000 account for 28% of all West Linn single-family home sales. Also, seven $1 million+ homes have sold this year.

]]> By: Stuart http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-859 Stuart Fri, 04 Dec 2009 08:04:26 +0000 http://www.move2westlinn.com/?p=1146#comment-859 Interesting statement Ron. Do you have a break down of volume by sales price, say, split into $50K or $100K bands? It would be interesting to see just how many sold from $500K to $600K, $600K to 700K, etc. My gut feeling tells me that the $500K to $800K has been very inactive, especially in this second half of the year, and it's only the uber-wealthy snapping up foreclosed $800K+ properties or the odd $1.5M dream home outside the city limits that are holding the number of sales above $500K up, except for a few opportunistic foreclosures and short sales in the "aspirational" $500K to $800K band. But hard data would validate that one way or the other. Interesting statement Ron. Do you have a break down of volume by sales price, say, split into $50K or $100K bands? It would be interesting to see just how many sold from $500K to $600K, $600K to 700K, etc.

My gut feeling tells me that the $500K to $800K has been very inactive, especially in this second half of the year, and it’s only the uber-wealthy snapping up foreclosed $800K+ properties or the odd $1.5M dream home outside the city limits that are holding the number of sales above $500K up, except for a few opportunistic foreclosures and short sales in the “aspirational” $500K to $800K band. But hard data would validate that one way or the other.

]]> By: Ron Ares http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-858 Ron Ares Thu, 03 Dec 2009 23:08:02 +0000 http://www.move2westlinn.com/?p=1146#comment-858 Michele, I will add a <em>slightly</em> more bullish voice here (compared to DJ, Stuart, and David :), but buyers for properties priced above $500,000 are indeed out there. In fact, 25% of transactions in West Linn sold so far in 2009 were $500K+. You may need to review the existing opportunities that exist on the market and see where your property value lies in comparison. Michele,

I will add a slightly more bullish voice here (compared to DJ, Stuart, and David :) , but buyers for properties priced above $500,000 are indeed out there. In fact, 25% of transactions in West Linn sold so far in 2009 were $500K+.

You may need to review the existing opportunities that exist on the market and see where your property value lies in comparison.

]]> By: Stuart http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-857 Stuart Thu, 03 Dec 2009 16:31:35 +0000 http://www.move2westlinn.com/?p=1146#comment-857 Well said dj. A rise in 30-year FRM's from 5% to 8% will mathematically lead to a drop in housing price affordability of about 20% if lending standards are held to. If we take a $500K home with $6K taxes and $800 insurance, putting $100K down leads to a PITI of $2714 with a $400K mortgage. Keep the same payment and downpayment, but increase interest rates to 8%, and the same payment only borrows $293K, meaning that even with the same $100K downpayment, our borrowers can only "afford" $393K. Whoops, there goes $107K off the value of the house. Only if mortgage interest rates rise slowly, and incomes (due to inflation?) rise to compensate, will we not see additional pricing slides. However, that hope is just a numbers game, as the value of goods and services that a house price actually buys, tumbles. Hopefully our President and administration don't turn us in to Zimbabwe: http://www.cnn.com/2009/WORLD/africa/01/16/zimbawe.currency/ Well said dj. A rise in 30-year FRM’s from 5% to 8% will mathematically lead to a drop in housing price affordability of about 20% if lending standards are held to.

If we take a $500K home with $6K taxes and $800 insurance, putting $100K down leads to a PITI of $2714 with a $400K mortgage.
Keep the same payment and downpayment, but increase interest rates to 8%, and the same payment only borrows $293K, meaning that even with the same $100K downpayment, our borrowers can only “afford” $393K. Whoops, there goes $107K off the value of the house.
Only if mortgage interest rates rise slowly, and incomes (due to inflation?) rise to compensate, will we not see additional pricing slides. However, that hope is just a numbers game, as the value of goods and services that a house price actually buys, tumbles. Hopefully our President and administration don’t turn us in to Zimbabwe: http://www.cnn.com/2009/WORLD/africa/01/16/zimbawe.currency/

]]> By: Stuart http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-856 Stuart Wed, 02 Dec 2009 23:26:51 +0000 http://www.move2westlinn.com/?p=1146#comment-856 Well said dj. Here's the math on a $500K home with a $6K tax bill and $800 insurance: Borrowing $400K at 5%, 30-year-fixed, the PITI payment is $2,714. However, if interest rates were 6%, the payment would be $2,965 - so our borrower will have to borrow less. If interest rates go to 8% (and they have before), then the payment is $3502. Almost $700 a month more. Definitely not affordable. As rates rise, the saved down-payment could be taken to be the same the same ($100K is now more than 20% down), but the size of the mortgage will have to shrink. In this case we can compute what the maximum house value for our prospective buyers will be for each interest rate in order to keep a $2714 payment 5% = $500K 6% = $458K 7% = $423K 8% = $393K (Using our 28% rule, our buyer needs a $116K+ gross income to "afford" the above prices at the given interest rates.) Rising interest rates will either prolong the current pain, or (if the economy tanks again as borrowing becomes suddenly more expensive for everyone) will cause another drop in prices. http://www.mortgagenewsdaily.com/mortgage_rates/charts.asp has a nice graph showing historic rates. 7% to 8% 30-year FRM is quite possible within the next 5 years, especially if inflation (due to all the money Fedzilla is printing) starts biting http://en.wikipedia.org/wiki/File:US_Historical_Inflation.svg. Let's hope the Obama administration isn't just Jimmy Carter 2.0, or worse. Well said dj. Here’s the math on a $500K home with a $6K tax bill and $800 insurance: Borrowing $400K at 5%, 30-year-fixed, the PITI payment is $2,714. However, if interest rates were 6%, the payment would be $2,965 – so our borrower will have to borrow less.

If interest rates go to 8% (and they have before), then the payment is $3502. Almost $700 a month more. Definitely not affordable. As rates rise, the saved down-payment could be taken to be the same the same ($100K is now more than 20% down), but the size of the mortgage will have to shrink. In this case we can compute what the maximum house value for our prospective buyers will be for each interest rate in order to keep a $2714 payment

5% = $500K
6% = $458K
7% = $423K
8% = $393K

(Using our 28% rule, our buyer needs a $116K+ gross income to “afford” the above prices at the given interest rates.)

Rising interest rates will either prolong the current pain, or (if the economy tanks again as borrowing becomes suddenly more expensive for everyone) will cause another drop in prices. http://www.mortgagenewsdaily.com/mortgage_rates/charts.asp has a nice graph showing historic rates. 7% to 8% 30-year FRM is quite possible within the next 5 years, especially if inflation (due to all the money Fedzilla is printing) starts biting http://en.wikipedia.org/wiki/File:US_Historical_Inflation.svg. Let’s hope the Obama administration isn’t just Jimmy Carter 2.0, or worse.

]]> By: dj http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-855 dj Wed, 02 Dec 2009 17:12:55 +0000 http://www.move2westlinn.com/?p=1146#comment-855 One more thing - I mentioned in my above post that the $6500 tax credit is not going to motivate a $500K+ buyer to act, but I forgot to mention that interest rates will. General consensus is saying that interest rates are going to rise in the latter part of 2010, and unless housing stabilizes, the rise in interest rates will put downward pressure on home prices, especially at the $500K+ level. As interest rates go up, the pool of buyers in the $500K+ range shrinks, so sellers are competing for even fewer buyers. Buyers are looking at their total monthly payments - at low interest rates they can afford more house; at high interest rates, they can afford less house. If sellers of $500K+ homes need to sell, then the homes should be priced to entice buyers who want to take advantage of the current low interest rates. Otherwise sellers are probably best to wait until the market recovers a few years from now and then try their luck at that time. If the goal is to get a buyer to pay Zillow's "Zestimate" pricing - good luck. One more thing – I mentioned in my above post that the $6500 tax credit is not going to motivate a $500K+ buyer to act, but I forgot to mention that interest rates will. General consensus is saying that interest rates are going to rise in the latter part of 2010, and unless housing stabilizes, the rise in interest rates will put downward pressure on home prices, especially at the $500K+ level. As interest rates go up, the pool of buyers in the $500K+ range shrinks, so sellers are competing for even fewer buyers. Buyers are looking at their total monthly payments – at low interest rates they can afford more house; at high interest rates, they can afford less house. If sellers of $500K+ homes need to sell, then the homes should be priced to entice buyers who want to take advantage of the current low interest rates. Otherwise sellers are probably best to wait until the market recovers a few years from now and then try their luck at that time. If the goal is to get a buyer to pay Zillow’s “Zestimate” pricing – good luck.

]]> By: dj http://www.move2westlinn.com/2009/11/30/west-linn-real-estate-market-activity-november-23-29-2009/comment-page-1/#comment-854 dj Wed, 02 Dec 2009 02:01:47 +0000 http://www.move2westlinn.com/?p=1146#comment-854 Hi Michele, welcome to these forums and for posting your question about current market conditions and how it affects the potential sale of your home. Unfortunately I have to agree with both Stuart and David's excellent analysis of the current market and I can't really add much to their observations, other than to suggest looking at the situation from the buyer's perspective. Here is the profile of a buyer in the $500K+ range: (1) They have the resources to be qualified for loans from banks, and have the required 20% downpayments to purchase a $500K+ home, as well as confidence in their life situation to take on a large monthly mortgage payment and property taxes. (2) There is a lot of inventory in the $500K+ range that is not moving. In addition, Lake Oswego also becomes an option for these buyers (3) In the $500K+ range, the $6500 tax credit is just free money, and not a motivator to make a purchase before April 30. (4) Buyers in this range are in short supply, and they know it. They have negotiating leverage, can be picky about homes. If they perceive a home to be overpriced for today's market, they just won't bother to make an offer, because there is such an excess glut of homes, and they'll just move on to the next one. However, I have heard that if a home is priced right, that it is still possible to get into bidding wars with other buyers. It's happened this past summer to a few of my acquaintances and is actually happening right now on a few properties in WL, even in the dead winter season. In a nutshell, today's buyer is not looking to spend $575K for a home that is "valued" at $575K. They are looking to spend $499K for a home that is perceived to be valued at $575K. Just look at the weekly numbers posted on this site and you will see that the few homes in the $500K+ price range are selling for 20-40% below their original asking prices. I'm sure you have a very beautiful home Michele, but the reality is that buyer's today are looking for a deal, and are not interested in paying full market price for a home, especially in the $500K+ range. You're asking $170/sqft which, in my opinion, is too high in a market where homes are selling for around $150/sqft. As Stuart suggests, if you're situation permits, it's probably better for you to stay in your home and wait for home prices to rebound, or cut your price if you still have equity in your home at a lower price point. Hi Michele, welcome to these forums and for posting your question about current market conditions and how it affects the potential sale of your home. Unfortunately I have to agree with both Stuart and David’s excellent analysis of the current market and I can’t really add much to their observations, other than to suggest looking at the situation from the buyer’s perspective. Here is the profile of a buyer in the $500K+ range:

(1) They have the resources to be qualified for loans from banks, and have the required 20% downpayments to purchase a $500K+ home, as well as confidence in their life situation to take on a large monthly mortgage payment and property taxes.

(2) There is a lot of inventory in the $500K+ range that is not moving. In addition, Lake Oswego also becomes an option for these buyers

(3) In the $500K+ range, the $6500 tax credit is just free money, and not a motivator to make a purchase before April 30.

(4) Buyers in this range are in short supply, and they know it. They have negotiating leverage, can be picky about homes. If they perceive a home to be overpriced for today’s market, they just won’t bother to make an offer, because there is such an excess glut of homes, and they’ll just move on to the next one.

However, I have heard that if a home is priced right, that it is still possible to get into bidding wars with other buyers. It’s happened this past summer to a few of my acquaintances and is actually happening right now on a few properties in WL, even in the dead winter season. In a nutshell, today’s buyer is not looking to spend $575K for a home that is “valued” at $575K. They are looking to spend $499K for a home that is perceived to be valued at $575K. Just look at the weekly numbers posted on this site and you will see that the few homes in the $500K+ price range are selling for 20-40% below their original asking prices. I’m sure you have a very beautiful home Michele, but the reality is that buyer’s today are looking for a deal, and are not interested in paying full market price for a home, especially in the $500K+ range. You’re asking $170/sqft which, in my opinion, is too high in a market where homes are selling for around $150/sqft. As Stuart suggests, if you’re situation permits, it’s probably better for you to stay in your home and wait for home prices to rebound, or cut your price if you still have equity in your home at a lower price point.

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