Tuesday, May 1, 2018

Softening Market could lead to Deals... or not!

So analysts are projecting a soften market this year. That is not to say they expect prices to reverse but more likely that the rate of appreciation will soften. Rising rates are the biggest culprit in this, but wages have also fallen behind real estate prices as well.

On the coast many people are looking for vacation homes, second homes, etc. Rising rates makes the cost of such more expensive and thus leads to fewer buyers in the market. The Long Beach Peninsula isn't a large market and doesn't have a deep supply of buyers. This could be an issue. For buyers thinking about the coast, now is the time, rising rates tend to hurt buyers more than rising prices, and even in a declining price market higher rates hurt buyers more. Declining prices in Washington State are not on the minds of any analysts I have seen.

Cash buyers tend to fare better in rising rate markets, but if prices also continue to rise cash buyers a better off buying as soon as they can. Take a peek at this article from one of my other blogs...

Analyst Projections are Softening for 2018

The overall Portland Metro area has already seen a slowdown in the rate of price appreciation in the first 1/3 of 2018. There is near unanimous analyst agreements that market conditions will soften as the year progresses. For buyers that may not seem like the case especially resale buyers in places like Portland, where inventory remains critically tight.

A low inventory definitely tips the scales towards sellers int he supply and demand view of economics, but demand in real estate is a little different than demand in many other commodities. Demand for real estate is almost always high, but the problem isn't that there aren't ready and willing buyers, there are plenty; the problem is that there are many "able" buyers.

The greater Portland-Vancouver market has seen housing price growth so outstrip income growth that many ready and willing buyers are simply no longer able. Many sellers still believe they can list their home for a sky high price because they have a "rare" commodity. But having something rare still requires having more buyers than sellers. For example, if I have a rare and desirable item that I price so high no one can afford it, I will not sell it, even if it is the only one on Earth.

One real classic trap that I see seller's right now falling into is the chasing down the market. Last year a seller could float a high price above market and get away with it. Buyers outnumbered sellers so much that someone would always step up and make an offer close enough to close. But now I am seeing, and the analysts have confirmed, that strategy is leading to a series of price reductions from sellers.

A series of price reductions puts buyers in a position of strength against sellers. As interest rates rise the pool of eligible buyers shrinks. Sellers are well advised to price their home at market pricing because higher interest rates reduce the buying power of prospects for the home. Remember inventory IS in short supply, but recent conditions have also reduce the supply of "able" buyers. This local market is moving into a neutral status where it is neither a seller's or buyer's market. I still think current conditions tend to favor sellers, but another few upticks in interest rates could level the field.

For younger buyers that have never seen a mortgage rate above 6 percent, I'll tell you this. The 50 year average rate on a home loan is still above 6%. Young people have seen these historic low rates as the "norm" when in fact this has been an abnormal decade for interest rates which are now beginning to normalize. Paying 6% on a mortgage loan is still reasonable when compared to the long term averages.

That however does not mean the buyers shouldn't try to score a house while rates remain lower than 6%. Interest rate is a much bigger impediment to buying a house than price. Interest rates will likely rise faster than prices this year, so buyers should focus on their ability to pay, not trying to grind out the lowest price on a house.

So overall Clark County, Washington saw roughly 10% growth in the median home price from 2017 to 2018, most analysts are projecting 2018-19 growth to be about 1/3 that in the 3% range. So prices are still rising, but not at the rate they were last year. Incomes are the limiting factor. For buyers, the price slowdown may feel like a reprieve, but combined with the up creep in rates the purchasing power will make the market "feel" like it's rising just as fast as last year.

Sellers need to be cautious, analysts are not the end all be all. Market conditions can be fragile, and they are in my opinion fragile right now. If national and local economic indicators remain strong most of the analyst projections will likely pan out, but any negative economic factors could lead us back to a buyers market. Sellers: A bird in the hand is better than two in bush, in 2018.

Tuesday, April 3, 2018

April is Razor Clam Time

I wrote about the Razor Clam festival a few years back. I am having a lazy moment and decided to repost the original from 2014. The website is the same and there is a long list of events scheduled for 2018. Do you really need an excuse to go to the coast? Well, just in case you do, now you have one.

Washington State Department of Fish and Wildlife
It's Back! Yes the classic Razor Clam Festival is back in Long Beach. Clamming has long been a favorite past time on the beaches of the Pacific Northwest and the Long Beach Razor Clam Festival has roots dated back to the 1940s.

The community has teamed up with private sponsors and the State Department of Fish and Wildlife to put on a great big festival April 19th and 20th. Check out the website for the event here.

The Southwest Washington Coast is a great place to visit and a fabulous place to live. I have spent many a word writing about the great value afforded to property in this Long beach Peninsula market and now could be an ideal time to buy your dream getaway home or retirement home in tax friendly Washington State.

Whatever you fancy, get out to the coast and check out the Razor Clam Festival starting on the 19th.

Tuesday, March 6, 2018

Bayside is Good Too

I spend a lot of time writing about beachfront homes and close to the beach properties on the Long Beach Peninsula. Let's face it, the beach has a certain appeal for many. But the Long Beach Peninsula is in fact a... wait for it... Peninsula! The dictionary says this: "a piece of land almost surrounded by water or projecting out into a body of water". So the Long Beach Peninsula does not stick out into the ocean. It runs parallel to the sea and the Willapa Bay is on the east side. The good news is that there is loads of views and waterfront along the "bay side" of the peninsula. And since the LBP is so narrow, measuring just about 1.5-2 miles wide, it is always close to the beach, even from the bay side.

Look at this charming little ranch house on the bay side. This home is adorable and it is one block to the bay front. Head west less than two miles and you are splashing in the waves of the mighty Pacific Ocean. This fantastic little house with two beds and a pair of baths features 1188 square feet of living area. It is listed by Light House Realty for the mere price of just $229,900. The same house in this condition in a hackneyed neighborhood in Vancouver USA would set one back some $300k. Yet this house is a mile or so to the beaches and a 45 second stroll to the shores of the Willapa Bay. 

So the bay can be a lovely sight as well and prices along the east side of the peninsula seem to be a little better than those on the left side. But the Long Beach Peninsula remains a coastal wonderland at a great value whichever side you choose.

Tuesday, February 6, 2018

Retire to the Coast?

Many people that move to the Southwest Washington Coast are retired. It makes sense, really as retired people do not rely as much on the availability of high paying jobs as do those still in the working years. The coast is not exactly a hotbed of high tech nor is it filled with factory jobs. The only real stumbling block is that the coast is a fair distance away from the larger cities along the Oregon-Washington Interstate 5 corridor. The Long Beach Peninsula enjoys very reasonable housing costs and that can be a big bonus for fixed income retirees.

However there does come a time when we get older and need to visit our doctors a little more often. It is here that living on the quasi-remote coast can be an issue. There are plenty of physicians operating a practice on the Long Beach Peninsula and on the northern Oregon Coast, but hospitals and specialists may require an inland run to Longview which is 60 miles away.

This is probably the primary concern for retiring to the coast. If the medical services are adequate for your needs the rest is easy. Who doesn't want to enjoy the spectacular Pacific Ocean coastline? The weather at the coast is also more mild with wintertime temps a solid 8-10° warmer overnight and summertime highs an easy 10-15° cooler than most of the Portland Metro Area. Although the temps tend to be better moderated the rainfall is not. The coast can take a lickin' from frequent winter storms and that can mean a lot of rain and wind. Long Beach receives on average 79 inches a rain a year and that is double what Portland and Vancouver get on average. It's not that it rains more often, but more that it just rains harder.

But the coast is not that much different in terms of weather patterns and a nice long period of relatively dry conditions which arrive in July and stick around through the middle of September most years. 

Yes friends, retiring to the beach isn't for everyone, but it could be just the ticket for you so check it out!

Tuesday, January 2, 2018

Happy New Year!

2018 is here and I thought it might be a great time to peak at some 'off-season' coastal property deals. I found this clean and charming manny on a giant 0.29 acre lot with an attached garage, in Ocean Park. It's listed by Lighthouse Realty and appears in the RMLS. This is in the middle of the peninsula so you are about a half mile to the bay and a half mile to the beach.

This home has 1440 SF 3 beds and a pair of baths. What I really like is the cozy price of $189k. The Long beach peninsula continues to deliver value with pricing that is much lower than just a few miles south in Seaside.

The coast is an interesting place weather wise. You will get some serious breezy conditions on a regular basis and sometimes those gales to blow. Middle of the peninsula has the advantage of less wind but a bit further to the beach. generally winters are relatively warm compared to inland Portland and summers are relatively cool. The mighty Pacific moderates the temperatures nicely. Don't expect too many opportunities in January to sit on this fancy deck, but summers will be fantastic in this lovely space.

It looks like this new year will continue to deliver amazing values on the Long Beach Peninsula for full time residences or vacation properties. Perhaps even a rental. Happy New Year and best wishes for prosperity.

Tuesday, December 5, 2017

Holiday's at the Beach

The holidays at the beach can be either busy or quiet depending on where you go. December is one of the 'stormier' months and tends to attract storm watchers from the inland areas. Winter storms hit the coast with a special kind of vigor that is not often seen in the Portland Metro Area.

The temperature tends to be a bit warmer along the coast as the mighty Pacific Ocean moderates things a bit. But the rain and wind can come like a tropical storm, sans the warm temps of course. This is winter at the Beach.

As for the holidays the usual buzz can be felt at stores and commercial areas. The Long Beach Peninsula however is much more quiet on the roadways during the Holidays than in big cities like Portland and Vancouver. That can be very nice.

Be sure to head out to Long Beach for the New Year's Eve fireworks on the beach. A five minute deluge of mighty booms and sparks will welcome in 2018 at mid night.

That's all I got this time round, see you next year.

Tuesday, November 7, 2017

Rental and Vacations Homes at the Beach

If you have spent any time reading this blog, you know I have made it abundantly clear that the Long Beach Peninsula is the real estate value of the whole Northwest Coast Line from Brookings, OR to Port Angeles, WA.

So let's say you buy a vacation home at the beach. How does this set with your tax man. First before I write another word on taxes : DISCLAIMER ALERT! I am not a tax professional and am not advising anyone on specific tax matters. Before making any decisions about taxation and its implications on your personal finances, be sure to consult your tax professional.

OK so the IRS has some weird rules regard vacation or second homes and rental properties. Many people figure they will rent out their beach house to others when they are not using it to help pay the costs of ownership. This is fine but depending on how often you rent it, it could change the tax status of the property.

The IRS deals with second homes differently than it does rental properties. If someone buys a second home and they use it exclusively for their own purpose, ie. they do not rent it out, then the IRS allows under current tax law the owner to deduct the mortgage interest up to the limits, currently at a maximum mortgage amount of $1,000,000.

Interestingly according to tax pros, the IRS doesn't care if you rent the second home out so long as it is not more than 14 days in a calendar year. Even if you rented it out for a high weekly rate, so long as it never exceeds 14 days in a calendar year, you are not required to report it. The home remains a second home.

If the house is rented more than 14 days per year it is no longer a second home and is treated differently under IRS rules. It becomes a rental property and it may actually be better in the end but it will become more complicated as the expenses and depreciated are now taken into consideration, checked against the rental income earned, now required to be reported and appropriate taxes paid.

If the rental home loses money, ie expenses are greater than income, this can provide a shelter from taxation for the owner's annual tax bill. However, when the home is sold in the future there will likely be a large capital gain that could hit the home owner hard.

The IRS tax code is a complicated animal and this is why a good CPA that specializes in individual income tax service is indispensable. The whole point of this article is that great deals at the coast aside, owning a beach house either as an investment or second home can be even more affordable that just the price and mortgage payment would indicate. Talk to your banker and your tax pro and see just how affordable that beach house can be. The talk to your local real estate pro and see what's out there.