Tuesday, May 3, 2022

Warm Weather staying away this Spring

Spring is typically full of fickle weather but it tends to offer both warm and chilly weather often with quick transitions. This spring has been rather light on the warm weather with just a few days feeling summery.  

Coastal businesses do rely on nice weather to bring the inlanders out to the shore for recreation. Here's hoping May brings some warm weather for the coast. At least some sunshine would be nice, right? One event scheduled later this month is the Oysterville Spring Garden Tour. Oysterville is located up near the top of the peninsula and is a lovely restored town. If you haven't visited the garden tour is a great way to to see it for the first time.

The date is May 21, 2022. This is a ticketed event with limited tickets: here is a link for more info.

For other cool events check the Long Beach Peninsula website here.

Tuesday, April 5, 2022

Long Beach Peninsula getting Expensive

The mad pricing in Seattle and Portland is not alone as the coast has seen a robust increase in housing prices. The overall market has been mostly driven by a lack of inventory more so than a glut of buyers. Supply chain woes and a severe shortage of labor has made building homes that much harder. the insane inflation of the last 12 months adds to the cost of building and even maintaining a home. All of this adds up to price pressure that gets further exasperated by a complete lack of sellers.

The peninsula is seeing prices that are now almost double what they were just five years ago. The area is still a relative bargain when contrasted to the soaring prices in Seattle and Portland but the $100k beach house has definitely faded off into the horizon of the rear view mirror. The Long Beach Peninsula saw a 22% increase in prices over the year from 2021 to 2022. That is bit faster pace than the I-5 corridor cities. 

With rates on the rise and pricing as well, buyer looking for the beach house dream need to pull the proverbial trigger now, before the dream slips away.

Friday, March 4, 2022

How Will Higher Rates Effect Your Coastal Dream?

Originally posted 2/25/2022 on Rod's Real Estate News...

Rates are on the move again and they are not going in the direction we prefer. Rates were solidly in the mid threes for the better part of last year and now we are seeing rate in the low to mid 4s. Now rates can vary widely based on the specifics of the loan and the borrowers financials but these are pretty typical.

The median priced home in Clark County is just a bit above $500,000. Let's say you are planning to purchase a home at $500k. Three months ago you might have qualified for a 3.5% 30 year rate. With 20% down you would borrow $400,000. I am deliberately keeping it simple excluding things like points, buy downs, fees, etc. The payment without taxes or insurance just the principle and interest (PI) would be $1796 per month. Now the same house at 4.5% will have a PI payment of $2027 per month. That's $230 per month MORE for the same amount borrowed. 

Buyers need to act now. Not only are they facing interest rate risk but housing prices last year went up more than 18% year over year. This year has not yet shown a slowdown. At that pace the $500,000 dollar home goes up at a rate of $7500 per month! Keep in mind that any rate under 6% is still below the fifty year average rate. But interest rates can also lead to qualifying issues. Your lender approves a monthly payment for you. When the letter says you qualify for $500,000 it is based on the rates available at the time of the letter. Most good loan officers build in a little cushion for minor rate variances. 1% is not minor. If you qualified for a max purchase price of of $500,000 at 3.5% with 20% down, then 4.5% will lower the amount of house you qualify for. That means you now only qualify for $443,750 with 20% down. Or you can buy the $500,000 dollar house but have to put more more than 20% down. The loan amount difference is $45,000 so that's how much more you have to put down to compensate for the rate difference.

This can be brutal when both rates and prices are rising. But once a buyer makes the purchase, they have their payment locked in and they begin to enjoy the market appreciation for themselves. Sitting on the fence is rarely a good idea, sometimes but rarely. 

Tuesday, February 1, 2022

Can Expensive Real estate be a Good Thing?

 From Retire to Washington blog last week...

Washington State is now famous for its expensive housing. Sure, states like California and Hawaii have significantly higher housing costs, but Washington is currently the 4th most expensive in the US. This can be a problem for retirees looking for a place to hang their hat. What if I told you, that higher housing prices can be beneficial?

Now this is an angle that only works in certain situations. But buying a house with 20% of you own money in an expensive market can lead to far greater wealth as the home values increase. Later in life that expensive house can provide a lump sum of cash or a lifetime of handsome cash flows whereas a cheaper house appreciating at the same rate cannot produce an equal equity gain over time. 

Say I buy a $500,000 house here in Vancouver USA with $100k down. Lets say over 20 years the house doubles in value which based on the last twenty including a HUGE correction in 2009-2012 is still conservative, I now have an asset valued at $1,000,000 with a debt load of $202,450. That is nearly $800,000 in equity and roughly $750k net if I sell the house. God forbid I need specialized elder care at this point, I can afford $5,500 (State Average) a month for more than 11 years!

Let's take a look at a cheaper state like say Mississippi. Now a nice house down near Gulfport can be had for $250,000. Run the same scenario out twenty years and you have a house worth $375,000. Why? Because Vancouver USA has more than double the rate of appreciation over the last 20 yeas than has Gulfport, MS. Now all fairness, the past doesn't alway mean the future will be the same. So we owe $101,225 and have an equity position of nearly $275k offer roughly $250k net after sale. Comparable elder care is about 25% less expensive in Mississippi. I will still run out of money in less than 6 years at the star average of $3,500 a month. Not only is there less money to pay for care, you are getting arguably less quality care since Washington is among the highest rated states for health care.

Many retirees plan on using the equity in their home to stabilize cash flows as retirement funds become diluted by inflation. A reverse mortgage is an option for some and so long as there is ample equity, the reverse mortgage can provide actual income. The more expensive house will generate a larger cash flow all else being equal.

Paying all cash for a property is not always the best idea. A reverse mortgage can sometimes be a better option providing cash based on a current value could protect the owner from downside market trends that occasionally occur. The reverse mortgage is designed as a long term investment for the bank with the short term protection of a large equity position. I am not pushing reverse mortgages here, but for some they can be a good tool especially in a high value area.

Last bit on the reverse mortgage, they are very rate sensitive. Higher interest rates reduce the amount of potential cashflow due to the higher loan service needed to cover the interest. Interest rates could rise in the next few years to levels that make the reverse mortgage unsustainable and thus unavailable.

So for buyers using a traditional mortgage to buy their retirement home, expensive states tend to be a barrier and Washington is among them obviously at #4 on the median housing cost list. But again if housing costs are rising equally the equity gained in a state like Washington is going to be far greater than that gain in a less expensive state. Some states with low housing prices have these low prices because the market doesn't appreciate as well as other states. In that scenario the cheaper house not only produces a lower gross equity gain it does so at a slower rate of gain. If you are going to stay in the house till the bitter end, this is not a problem. But what if you need to sell it to provide cash for elder care like the scenario above? You could end up on federal assistance rather than choosing your own care options.

Retirees should take time to work with a professional planner to see how their own situation lines up and where the best options are. Here in Washington we are plagued with high housing costs in most parts of the state, but we have no income tax, and reasonable property tax rates. We have excellent weather to suit nearly any preference. I said nearly, if you want that tropical island feel Florida is that way (pointing vigorously to the Southeast). 

When you decide Washington is the place for you, call me and I'll help you find the ideal house.

Tuesday, January 4, 2022

Rare Snowstorm Blankets the Coast

A typical winter at the beach results in little or no snowfall. Sure some flurries may fly when the chilly winter air dips down from Canada, but generally snow is a fleeting event on our typically mild coast. 2021 decided things would be different as the year went out with cold temps and sometimes heavy snowfall on the peninsula beaches.

My sister's home in Oysterville saw snow depths of more than four inches at times last week. Starting on Christmas Day and all the way through to the new year, storm after storm, system after system, brought snow rather than rain to the normally wet coast. 

The real oddity was having snow on the ground for a whole week. That is not strange for the inland locations this time of year but at the beach? Yeah definitely an unusual display and a wild way to end a wild year.

2022 started out a little more "normal" as temps jumped up into the mid 40s and buckets of rain replaced all that snow with good ole water puddles. The next few weeks should provide some excellent storm watching opportunities and as always be very careful; the Pacific Ocean will literally eat you if you are not cautious.

Tuesday, December 7, 2021

Storm watching is back!

We have had a fair bit of rain and wind over the last month and the coast is the best place to watch Mother Nature unleash her fury. Although the pandemic is still around, vaccinations and better treatments have allowed people to get out and about more often. But the hotels and B&Bs still have space for traveller looking to storm watch on the Peninsula.

Here are some tips about the best places to watch storms, taken from the Long Beach Peninsula Website:

  • Waikiki Beach: 200 foot cliffs, giant waves, and the Cape Disappointment Lighthouse above make this a favorite spot for photographers. For a different perspective, head up to the Lewis & Clark Interpretive Center.
  • Dismal Nitch: Lewis & Clark christened this area “Dismal Nitch” after a rather unpleasant night camping along its shore. Find this location on the Columbia, just east of the Astoria-Megler Bridge.
  • Pickled Fish: The restaurant atop the Adrift Hotel is the only Peninsula restaurant that overlooks the ocean, making the perfect perch for storm-watching season.
  • Willapa Bay: Watch miles of storm clouds hang heavy over the placid waters of the bay. Vistas stretch well into the Willapa Hills, offering expansive and exciting views of Pacific County.
  • The Beach: Bundle up to feel the full force of the storm. It’s an invigorating and refreshing experience unlike any other. Beware of sneaker waves and tides.
  • Stay with a View: If you prefer to stay indoors and watch in your pajamas, find oceanfront lodging and simply open the curtains.

Tuesday, October 5, 2021

The Reverse Mortgage looks Attractive Right Now

 Originally posted on "Retire to Washington" September 28th, 2021by Rod Sager

The Reverse Mortgage as a purchase tool in the current market is perhaps stronger than ever before. With rates under 3% possible and inflation at record levels, this product is a solid tool for any retiree with some cash on hand or large amounts of equity. Generally a younger retiree, say 65 years old will need at least half the purchase price in cash. Selling a home with a large amount of equity and downsizing can lead to a large down on the new house. Now the retiree can live in the house indefinitely without paying a mortgage payment. In some cases if the property was free an clear, the bank will pay a monthly payment to the homeowner indefinitely. The low interest rates make reverse mortgages an attractive alternative to more conventional financing methods. It is not for everyone, so borrowers should consult a trusted mortgage professional.

The premise is this: Borrower puts a large down payment or refinances a free and clear property. The older the borrower the more flexible the terms. Generally 50% down is a minimum requirement. The borrower makes no payments. The interest accrues as normal so every month a little bit more interest is applied as the loan balance grows. When the borrower leaves the residence, the bank collects the full amount of the balance. Typically this would be done by selling the house and paying off the mortgage with the proceeds. Any left over amount after closing would be returned to the borrower or to heirs. Retiring without a mortgage is a nice idea and some may not be able to buy a house completely free and clear. The reverse mortgage allows the borrower to have no payment and that can be rather reassuring especially in the hyper-inflation scenario we see brewing right now.