North Sound Property News

So maybe you noticed I haven’t been posting a lot lately.  Maybe you were wondering why?  Well, two reasons really.  One, I couldn’t see blogging much during the summer, because once summer finally arrived, it was fantastic.  If it comes to a choice between being inside blogging or outside doing just about anything else, I’ll choose the latter almost every time.

  Two, with everything that’s happening, I really couldn’t figure out what to say about any of it.  Call it denial, or writer’s block, or just a short attention span, the reality is, I didn’t feel I could do justice to the complexity of what is happening in the real estate and credit markets with a short post…  So rather than write a short post, or something trite, I chose not to write anything at all.  Bad blogger!

 But, I feel like it would be irresponsible to let this week’s events pass without a blog post about the issues with WAMU, and maybe a few words about the impact of the financial crisis on our Snohomish county real estate market, and Mukilteo in particular.

 With regard to WAMU, there is hardly anything I or anyone can say to express what a big deal this is, not just on the local level.  This is a news story of national, or even global scope.  If it fails it will be the largest bank failure in American history.  This is huge.

As to the government response, I think that the Treasury and the Fed have been a bit hamstrung over the last few months between wanting to control inflation, on the one hand, and recession on the other hand, brought on by the collapse of the housing market.  At this point, the biggest challenge to the health of our economy is no longer inflation.  Though, heaven knows that is much worse than we are being led to believe given that any American consumer can tell you that the cost of just about everything from gas to milk has gone up substantially in the last 3 years.  At this point, the biggest threat to our economy at this point is a recession, or possibly even a depression, brought on by lack of available credit.

 For better or worse, credit is the engine that drives our economy.  Without credit, the majority of Americans can’t buy a home.  Without credit, most new businesses cannot open their doors.  Without credit, existing businesses cannot expand, and our economy cannot grow.  And credit dries up when investors become afraid to invest in our economy.  Our government can’t allow this to happen, so when these are the stakes, I believe they are right to do whatever it takes to restore confidence that investment in our economy as a whole is generally a safe and prudent one. 

 So I am hopeful that this is a first step to restoring that confidence, but I doubt it will translate to much in the way of change for the local housing market for some time to come.  We still have too much inventory, prices are still too unstable, and there is still a long way to go before either of those factors change.

That doesn’t mean I think it’s foolish to buy or sell a home at this time, but I do think it is foolish to do so without being aware of the true situation, and the potential risks/rewards.  For some, the idea of buying into a declining market is completely unacceptable.  For others, the long-term rewards of owning still make sense - whether it’s the desire to put down permanent roots or the possibility of picking up a “bargain” in a weak market.  And for sellers, the decision to sell or hold a home will depend largely on your personal situation.  If you still have a lot of equity in your home, and are planning to move anytime in the next couple of years, now might be a great opportunity.  If you don’t have a lot of equity, and don’t really need to move, then now may not be the time.  The key is to do your due diligence and make sure your decision is one that makes the most sense in your individual situation.

So, all of that said, where is the bottom?  Are we getting close to it yet?

The first thing to note is that unlike this time last year, the addition of new inventory has slowed down.  That’s a positive–that indicates that things are stabilizing a bit.  By and large sellers have figured out that the gravy train has ended, and we are seeing less of the “fly it up the flagpole” types of listings coming on the market.  What we are seeing, however, is a lot more in the way of distress sales - short sales, pre-foreclosures, divorces, estate sales, etc.  These are the types of sales where bargains can be found.

So in general, we still have a lot of inventory, and new inventory is still hitting the market but it’s not growing at a 30% clip like it was last year, and most of it is what I would refer to as being “motivated.”   We are also seeing a slowdown in new construction hitting the market, but this may depend on where you are.  Here in the Mukilteo market, we still have a good amount of new construction coming online from Crown Park, Westridge, the Fairview and now, a new development coming in at The Arbors, which should have it’s first model available in November.  However, compared to last year, production has definitely slowed.  Areas with a lot of new construction are seeing the biggest price drops as builders try to unload their inventory.

 Which brings me to the first sign of finding the bottom: inventory will be shrinking, rather than growing.  All these projects that have been permitted in the last few years and which are still coming on line are going to be driving our market for some time to come.  Remember, it was lack of inventory that drove prices up, and now it’s a glut of inventory (along with a few other things like tighter credit terms) that is driving prices down.

Second sign of a bottom?  Prices will stabilize as a result of less inventory to choose from.  Just as prices started leveling off in June of 2007 and held steady for several months as the flow of credit into the market slowed and inventory began to increase, one would expect to see prices stop dropping and level off, and credit loosening up a bit, before any kind of return to appreciation is likely to occur. 

 In some areas of the country this is already happening, but the Seattle metro area appears to be lagging behind those areas.   Some argue that this is because much of Seattle’s business activity is in the B2B sector (think Boeing, Microsoft) and cutbacks/expansions in B2B spending tend to lag cutbacks/expansions in consumer spending.  We lagged behind the rest of the country as appreciation accelerated, we lagged coming into the downturn, and it probably makes sense that we will lag when things turn around.

Here is the first truth about short sales: there is no “one truth” about short sales.  If you ask 10 different agents about what it’s like to work short sales, you’ll probably get 10 different answers, which will be influenced by the agent’s personality and tenacity, the situation surrounding the short sale, the lender itself, and who they talked to at said lender.

 The point of this post isn’t really to imply that all short sales are the same and that there is only one way to handle them, simply to pass along some things I’ve learned when I’ve handled them.  Your mileage may vary.

 First things first.  You may be reading this and asking, what is a short sale?  A short sale can be called by many different names, but all of them refer to asking a lender to forgive debt on a house that is sold for less than is owed.  This situation is referred to as being ”under water” or negative equity.

In my experience, getting a short sale to go through requires a very tenacious real estate agent, buyer and seller.  There are a lot of obstacles that can get in the way of getting a short sale approved and you have to be willing to diligently work through those issues and provide the information requested in order to get the short sale approved.  You also have to know how to navigate through the various levels of bureaucracy involved, or it won’t happen.

 One of the first things to know is that if a short sale is approved, the debt to the lender does not go away.  Usually what they want to do is attach a lien to any other assets you may have, or work out a repayment plan.  If it’s clear that there are no assets and no way to repay, then and only then is it possible to have the debt forgiven.  If the debt is forgiven, the IRS considers this as taxable income, and you will have to pay taxes on it.

The second thing to know is that there is no way to do a short sale and not have it affect your credit in some way.  The best you can hope for is to mitigate the damage by being cooperative and communicative with the lender.

I think it’s already clear that this is not a situation to take lightly.  The only seller who should consider doing a short sale is one who is in a MUST SELL kind of situation.  Death, divorce, illness or disability, and other such life-altering types of events are the kinds of things that commonly are associated with these kinds of sales. 

Generally, if you’re still paying your mortgage, and it appears to the lender that there is no reason to believe you can’t continue to do so, they won’t approve your short sale.  If you are more concerned about the damage to your credit than you are about selling the house, and you are still able to pay your bills, you may not really be in a situation of having to do a short sale.  Perhaps a better choice would be to take your house off the market and rent it out, if you can find a renter.  Of course, if you can’t find a renter and if you can’t pay the mortgage without one, you may be back to having to consider selling short. 

The bottom line is, a short sale should be a last resort.

 To get a short sale approved, you have to put together a “short sale package.”  Each lender has slightly different criteria for this package, but there are some common elements.  The purpose of the package is to build the case for why the lender should consider taking a loss on their loan, as they won’t do so unless they believe that this loan is going bad no matter what.  The package usually includes a hardship letter, detailing the circumstances of the short sale–the sadder the story, the better the odds of approval.  Other elements of the package include financial statements, pay stubs, medical bills, divorce decrees, etc. 

 The most important element of the package is the purchase and sale offer, as a lender isn’t going to consider the short sale until there is an offer on the table and it can be proven that the sale price is indicative of market value, after having allowed a sufficient period of time to sell. 

Once this package is put together and submitted to the lender, it can take several weeks to get it approved.  The best way to speed the process along is to follow up diligently on all requests.  It’s also important to choose an agent who is experienced with short sales, understands the behind-the-scenes structure at the lender, and can motivate the different players involved to achieve a speedy resolution to the process. 

 There is a lot more to be said about short sales, but each sale seems to be highly individual, as every seller, buyer, lender and agent may handle things a little differently.  Some buyers think short sales are a great way to pick up a property that is a good deal…and in some cases they can be.  Most buyers wish to avoid the hassle and uncertainty involved with any deal where a third party is involved.  Some sellers think that a short sale is a “get out of jail free” card, when in fact a short sale is a very arduous process that involves some fairly serious negative ramifications.  Other sellers are so afraid of damaging their credit that they won’t consider a short sale until the damage done by waiting is worse than it would have been by approaching this kind of sale from a business perspective.

 The bottom line is, that in a market like the one we are currently experiencing, it’s becoming increasingly important to understand how short sales work, and decide for yourself whether buying or selling a short sale home makes sense in your particular situation.

Lots going on around Mukilteo and South Snohomish county over the next couple of weeks.  Top story for me this weekend is probably the grand opening of the Mukilteo Transit Center tomorrow, May 31.  The schedule of events includes:

10 a.m Grand Slam Family Fun Celebration starts! Enjoy refreshments, games, mascots, souvenirs, and live music until noon.

10:30 a.m. Speaking Program and Station Dedication

11:26 a.m Inaugural train leaves Mukilteo Station for a Free Ride to Safeco Field. Let’s play ball!

Return trip: 35 minutes after the Mariners game ends, a free return train leaves King Street Station for Edmonds, Mukilteo and Everett stations.

Beginning this Wednesday, June 4, the Mukilteo Farmer’s Market returns to the Rosehill Community Center.

Another summer brings the return of the sun, and of the Mukilteo Chamber Concert series.  The first concert of the year will kick off summer at the Lighthouse at Mukilteo State Park on June 6 at 7pm.

On Saturday, June 7, the Animal Farm at Everett’s Forest Park opens.  This is a great educational experience for children to see live farm animals.  A $1 or $2 donation is requested to offset the cost of caring for the animals.

On Tuesday, June 10 from 5:30 to 7:30, downtown Everett “green” real estate brokerage Greening Properties will be hosting their second monthly Greendrinks event. 

According to the Greening website:

Let’s raise a toast to the planet while we figure out ways not to toast the planet.
 
Never heard of Greendrinks?  It began in Europe and now sustainability people in over 342 cities all over the globe meet monthly for libations.  It is a lively mixture of people from non-profits, academia, government and business and is a great way of catching up with folks you know and for making new contacts.  Greendrinks is simple, unstructured and rather organic.  People have found jobs, developed new ideas, done deals and had epiphanies at Greendrinks.  Check out all the ways to have Greendrinks at www.greendrinks.org.

I love the idea of events like Greendrinks and am hoping to be able to attend.  I love companies like Greening that show the socially conscious side of the real estate industry.  The real estate industry helps put people in homes and there isn’t a whole lot that is more personal and human than that, but sometimes we forget that you can’t just build houses and stick people in them without looking at how that home impacts its surroundings, both with regard to the environment as well as the social and economic fabric of its community.  I feel the green housing movement and the affordable housing movement (which is my personal passion) are very closely related and I look forward to attending Greendrinks and meeting some of the movers and shakers in the county’s sustainable development efforts.  I’m also excited to see a company like Greening getting its start right here in Snohomish county.

That’s a quick roundup of local activities coming up in the next couple of weeks.  Enjoy the great weather we are having!

Due to time constraints, there is just one home featured in this week’s Mid-Century Modern Home of the Week feature, but I would also like to let you know that you can order a full report of my selections of mid-century modern homes simply by emailing me. I will send you a PDF of the report with no obligation.

 I scan through hundreds of listings to select those that I feel are the best examples of Mid-Century Modern/NW Contemporary and Modern Homes on the market. There are 42 homes this week on the North End Modern Homes report, and 23 for the Seattle-area selections.  These homes are found in all neighborhood and all price ranges, some with view, some without.  The one thing they all have in common is great design.

Here is this week’s home:

5303 NE 178th St.
Lake Forest Park
$699,950
MLS# 28042650

Incredible gallery entry opens to quarried stone fireplace, hardwoods and slate throughout, vaulted ceilings with exposed timbers, solid douglas fir paneling and built-ins, and wonderful period-appropriate retro-modern kitchen and bath renovations. This home has an incredible array of architectural features at this price, plus, you get a deeded membership to Lake Forest Park Beach Club. http://www.windermere.com/28042650

I often talk to people about how exciting I think all the changes that have been taking place for the last few years in the Downtown and North Everett area are.  I talked in the last post about the Port Gardner Wharf redevelopment project.  Another thing that the city has been promoting are its summer events.  These events are a great opportunity to check out a community that many people are not familiar with.  Everett has a lot going on–I recommend checking out these events, and you will discover not only that Everett has a lot to offer in terms of activities but it is also one of the most beautiful small cities in the Pacific Northwest.

Official Opening of Boating Season: May 3
Farmers Market: June 1 through September 28
4th of July Waterfront Celebration and Thunder by the Bay!
Jetty Island Days: Begins July 5th
Fresh Paint Art Festival: Sat. and Sun., August 16th and 17th