Market Crash?

 Originally posted in Rod's Real Estate News, Nov 3, 2023

Some doomsayers are predicting another serious market correction is eminent. Now this is certainly a possibilty. Many of the conditions that precipitate a market correction are in fact in place right now. 

• Slightly higher than average lending rates. 
• Tightening of consumer credit by large lending institutions.
• Below average pool of qualified buyers.
• Hyper inflated prices after long aggressive rise.
• Unstable economic conditions.

These are all indicators of an eminent market correction. However there are also several counter conditions that are keeping the market stable in spite of the above bullet points. This certainly applies to our local market if not the market nationally.

• Extremely tight inventory levels driven by owners married to a low interest rate.
• High positive growth rates as more people moving in than out (Local Clark County).
• Continued high demand for rentals with inflated rental rates.
• Unstable conditions in other markets can drive investors back to real estate.
• High interest rates attractive to institutional investors buying mortgage paper.
• High overall quality of existing mortgage debt. Minimal sub-prime paper.
• Strong local economy helps us locally.

So the real news is that there is no news. Other economic conditions need to change for a traditional "crash" type correction. What we are witnessing right now is a very soft landing with prices flat or ever so slightly declining.

For buyers the decision should really be based on how long they intend to live in the house they might buy. If someone buys a house today and then decides or must sell it a year later, that is not a favorable situation and renting would definitely be the better option. In an uncertain market with a high probability of at least a modest correction I would recommend a five year commitment to any house purchase din the current market. 

I do not think a major hard crash like we saw in 2009-2012 is eminent. That situation was much bigger than real estate. Banks had been making really sketchy loans for over a decade and that led to a near collapse of the banking system. Those aggressive types of loans have been almost non-existent since the federal revisions were made by Congress in 2011. 

I'll play Devil's advocate and suggest that we have a repeat of 2009. What would that look like? Well suppose buyer Jones bought a house in 2008 for $300,000. By the time the market hit bottom around 2012 the house was worth about $175,000. Not good, not good at all if you had to move. The house returned to $300,000 in value around mid to late 2014. For the sake of being conservative let's say it was 2015. That is a seven year period from top to bottom and back to par. That my friends was the worst real estate crash since 1929 and the Great Depression. There is no reason that couldn't happen again, but it is extremely unlikely. 

Buyers willing to commit to a five year stay can rest assured that barring a catastrophic economic failure, they would be in position to sell with enough proceeds to clear the note and exit the property at the end of that period with maybe the exception of putting less than 5% down. Low down borrowers should add a year or two to the commitment window just to be safe. But in a mild correction even low down and no down borrowers would be able to sell and clear the bank note after five years. 

In general I wouldn't let higher rates or the threat of a possible correction stop me from buying a home so long as I am prepared to stay in that home for a minimum of five years. When rates settle down, and they will settle down eventually, buyers will have an opportunity to refinance the loan into a lower rate and save money in the long run.

Possible Sunshine in the Rates Next Year!

Originally posted in Rod's Real Estate News, September 29th, 2023

According to US News and World Report the trend for the next few months is a softening in rate pressure. Rates should start to ease a bit providing some relief for weary buyers that have been priced out of mortgages over the last couple years. Locally rates have been running at nearly 8% well above the national average. The chart below shows the national trend and the rates on the chart or prior to any fees or points that banks are in fact charging. Rates that borrowers are actually seeing or will see based on this chart would be 0.5% to 1% higher. Rates also vary based on the lending program, down payment amount, credit profile and other important financial details of the borrower. The good news is they seem to think it is starting to trend favorably for borrowers.

Well let's hope they are right. I do not expect a return to the ridiculously low rates of a few years ago. That was unprecedented. The 50 year average has been around 6.5% and I find that the market responds well to rates under 6%. If we can get rates back into the mid 6s the real estate market will come around. Right now we are in a stalemate as we have neither allot of buyers nor allot of sellers. Pricing is stable but softening and transactions are way down as a result of inactivity. Sellers are holding on to the low rate they have now and buyers can't afford the high rates currently available. 

This trend if it materializes could be good for current buyers. Sellers are getting motivated and that means a negotiating edge for buyers. Buyers may find themselves able to refinance their 8% purchase not in a year or so at a more comfortable rate in the 6s.  

If that chart holds up, things should perk up a bit next spring.

Mortgage Rates hit 20 Year High

 Originally posted on Rod's Real Estate News August, 2023

That sounds like an ominous thing. It really isn't as bad as it sounds however. The last 20 year cycle saw the lowest 30 year mortgage rates in the history or 30 year mortgages. We spent most of the last 15 years with rates under 5.5% So the headline sounds terrible, which is why every news outlet is running this very headline. They however do not take the time to cover the context, so I'll do that for you here.

According to Bankrate.com over the last 50 years the average mortgage rate has been 7.81% Yes 7.81%. During that 50 year period we had both the highest and lowest 5 year stretches ever recorded. From 1980-1985 the average rate was 14.32% From 2017-2022 rates average 4.17%. Here we sit today with a national average mortgage rate at 7.09% well under that 50 year average but painfully higher than the recent lows of just a couple years ago.

The rates had a rather rapid climb and that creates a psychological shock which tends to makes things seem worse that they really are. Sure many homeowners have decided to stay put and enjoy their 2.9% 30 year mortgage they got back in 2021. This has created a scenario whereby there is a lack of homes for sale at a time when we should see lots of activity. Generally the period immediately after a rapid rise in home values leads to a bit of an equity grab as people sell their homes and move up or downsize. We are not seeing that nearly as much as we should. This may actually be staving off a market correction that should have happened right about now.

So the good news is home values are holding up well, the bad news is, it is tougher to buy in to this market right now. don't let a 7% mortgage scare you away from buying a home. It may limited your buying power but rates will come back down and an opportunity to refinance into a lower rate will arise in the future.

Happy Birthday America!

photo from Long Beach website

Tonight is the big fireworks event on the beach. It is quite the spectacle, be sure to mosey on down to take a watch or participate. Or if loud noises and a sky filled with sparkling lights isn't your thing, better head inland for the holiday :)

This is one of those bucket list items you gotta experience at least once.

A revisit to State Parks

Originally posted here in 2020 by Rod Sager,

Did you know that SIX state parks reside in Pacific County on the Long Beach Peninsula Area? That's a fair number and from the mouth of the mighty Columbia up the peninsula to Leadbetter you can dive into the wilds of nature or wonder at the historical buildings of Cape Disappointment and Fort Columbia. There's more to an outing at the coast than a walk on the beach.

Check out the six parks at the beach.

• Cape Disappointment
• Fort Columbia
• Leadbetter Point
• Pacific Pines
• Loomis Lake
• Willie Keils Grave

March is here and soon the weather will turn the corner to spring. For now it is still a bit of winter but sunny days are ahead with late evening sun. Next month the Razor Clam Festival returns so keep your calendar clear.

Prices are up, but deals are still available

Prices along the Long Beach Peninsula have seen robust growth over the last few years. The days of nice move in ready homes at $225,000 have passed into yesteryear. Prices all over Southwest Washington however have done the same thing. Gone are the days of a nice move in ready home in Vancouver at $375,000. This leaves the beach as a bargain when coming from an inland location near Seattle or Portland.

Retiring to the beach is still a hot phenomenon and people are still doing it in large numbers. The Long Beach Peninsula remains still sweet bargain when compared to nearby Seaside, OR. I found a nice little house located just a few hundred yards off the crashing waves of the mighty Pacific with a public beach access point about 5 blocks away. Just a half block west are some of the most expensive beach homes in the area. The neighborhood is nice and the location is solid.

This home has 2 beds and 1.5 baths with 1316 SF of living space. It is situated on a nice large 0.24 acre lot and was built in 2014 so it's a modern home. Behind the home is one of the peninsulas lovely canals and you can walk to the beach in just a few minutes. It is priced at just $390,000. 

The weather at the coast is wet in the winter and dry in the summer with one of the flattest templates curves you'll find anywhere. Summer lows in the low 50s and highs in the upper 60s and in the winter lows are in the low 40's and highs in the low 50s for the most part. The beach does not get a lot of cold weather with only occasional snow falls that tend to be short lived. High temps above 85º are also rather uncommon. 

The beach is a great place for sand and surf lovers and retiring there is actually still affordable. 

This post excerpted from "Retire to Washington" by Rod Sager originally published 3/28/23. This is applicable to the SW Washington Coast which offers so much for retirees including favorable taxes and some of the most reasonably price ocean front on the West Coast.

As a long time veteran real estate agent, I have seen many clients move here or away from here to follow their grand children. In my own personal scenario my wife's parents moved to Vancouver to be close to their grandchildren after growing tired on long travels for visits. It is a powerful force this gravitational tug of baby descendants. I'm feeling it my self as my first grand baby is expected in July. I already want to be closer to my son and daughter-in-law. But Chicago? Not happening.

Washington State has a roaring economy which has been firmly in the top five in the country for more than a decade now. Strong economies produce high paying jobs and lots of opportunity for young people. This in turn draws young families to the region and sometimes draws grandparents as well. 

If you have a child looking at new job opportunities in Portland, OR or Seattle, WA but also looking at other areas, say Illinois, New York, DC, etc. it might not hurt to lean on them a little in favor of the Northwest. Either way you can choose Washington when you follow them and enjoy our top tier retiree situation. Mainly: no state income tax.

I have written ad nauseam about the wonders of Washington State with our diverse geology and climate. The taxes and advantages of Washington laws benefit retirees greatly. Although the west side can be cloudy and drippy it tends to be free of extreme weather. I hate extreme weather. We don't get bitter cold, we don't get super hot, we don't suffer extreme humidity in the summer, we don't get a whole lot of snow in the valleys, and we don't have a lot of natural disasters. These are all great things, and other great things include some of the most spectacular natural scenery in the country, and even a diverse political spectrum with something for everyone left or right. 

So nudge your kids towards the nice job in the Northwest and then pack up and follow them to paradise.

Spring 2023 might be late this year!

Here we are in March and snow flurries have been in the forecast nearly every day since mid-February. Sure here along the coast hasn't seen quite the chilliness of our inland neighbors, there is no doubt it has been chillier than average. The pattern according to the national weather service is going to continue for the foreseeable future. Will this nippy air hang out till past the Equinox and into "official" spring? Hard to say, but for now it seems it's here to stay. 

Late arrival for spring is not uncommon in the Northwest, it is rather just annoying more than anything. But coastal activities and events tend to start happening next month so we certainly hope that April will bring some warmer temps for things like the Razor Clam festival and other exciting events that usher in the warmer and drier half of the year.

Don't try to time the close!

This was originally posted on January 27th, 2023 by Rod Sager

All too often and sometimes against my best counsel, buyers and sellers will try to time the closing to a specific day. As the title states, that really is a fool's errand. I wrote a post right here own this blog back in 2020 that sums it up well:

"All too often I find buyers and sellers trying to line everything up for the perfect close and move. Real estate transactions have lots of moving parts, seriously, internal combustion engine levels of moving parts! Trying to time everything perfectly with a train of buyers and sellers all lined up like the proverbial dominoes, is like herding cats.

I have mentioned this before and it is worth mentioning again. Buyers do not try to time your closing with your move out date for perfect alignment. That is a recipe for drama. You have a seller who is moving and often waiting on another seller at the other end who is waiting on a seller, etc. Pay a few bucks extra rent and give yourself a two week cushion. It's the best money you ever spend because now you are moving slowly rather than in a rush. Even in the best case scenario with the "perfect timing" approach you end up damaging your current apartment/house and or breaking your valuables because you are in a hurry. The worst case scenario is that you have movers show up but your seller can get out! Save yourself the heartache buy giving yourself a two week cushion. You'll thank me later :)"

In the situations where multiple parties have transactions up or down the chain the number of moving parts multiplies making a percent timing situation that much more complicated and unlikely. We all have enough drama in our lives don't we? The wise person gives themselves and other a cushion to ensure a smooth and happy close.