We have the Ferrari of real estate information at Windermere, CCRGI.
We have Brian Allen.
Brian is what most certainly is a remarkable combination of business savvy, charisma, and down-right nerdiness when it comes to reading, interpreting, and following statistical trends. The best part is, Brian gleefully shares everything he learns with us. And let me tell you, there is no shortage of data and opinions about what is going on with the housing market right now. He reads blogs that he has learned, over time, to trust and rely on, creates elaborate graphs from the data he collects from the RMLS and other trend programs over time, talks with experts at lending institutions, and watches economists’ forecasts like no one else I know.
And then he gives the graphs and data to us so we can give them to you.
I have them. If you’d like them, please shoot me an email and I’ll be happy to give them to you.
In a nutshell, this is what I learned while listening to Brian a couple of weeks ago at our kick-off meeting:
Prices are at 1993 lows, interest rates are as low as they were in the 1950s, and the banks that have been hanging on to their inventories of foreclosed homes are showing some signs that they may be releasing them on to the market, faster and in greater quantities than they have in the past.
If you bought a house in 1993 for $200,000, the interest rate you would have paid would have created a house payment much higher than that same $200,000 purchase today. One interest rate point makes a load of difference.
House payment on a $200,000 loan amount then at 7% (without taxes and insurance): $1330.60/month.
House payment on a loan amount of $200,000 now at 4% (without taxes and insurance): $954.83/month.
The moral of the story? Paying that monthly house payment on a loan amount of $200,000 today is less money out of your pocket every month than a house payment made on the same loan amount, in 1993. You pay $375.77 less per month, $4,509.24 less per year.
The secret of good investing? Laying out as little as money as possible, with others taking as large a portion of the risk as you can get them to take, with an end result that gives you as much profit for your money as possible.
I have buyers who just bought a house. They put 5% down. That means the bank is taking 95% of the risk. Their down payment was smaller than many people’s tax refunds. They bought a sweet little house with incredible potential for upgrading and adding value in an area of Portland that is so hot there are far more Buyers than inventory of homes available to purchase. Their house payment is far below what they would ever pay, in that area, for than amount of space, to rent.
They waited, finally decided to buy, and I can’t think of a better time to have done so. I know this is true because I watch and read real estate blogs, listen to people I trust who are better at making predictions that doing post mortems, and ponder RMLS and TrendGraphix statistics too. But not to the extent that Brian Allen does. And he agrees.
Much of the data he trusts comes from the Case-Shiller Indexes. You can find them at: http://www.caseshiller.fiserv.com/indexes.aspx
Some lenders, and at least one of our most trusted and local Credit Unions, are now offering 100% financing. I received a brochure in the mail from OnPoint advertising this a week ago.
Buyers will likely not get the best interest rate if they go that route, but that option is available after being conspicuously absent for the last few years. Minimum credit scores have come down, and lenders are moving ever so gradually to open credit lending restrictions to make it easier to qualify for financing. It seems as though our in-house lender is announcing new credit options every other week at our office meetings.
If you applied for a loan a year ago and were denied, and you are employed and have been working in the same field for over two years, and you really want to buy a house, I would talk to a lender and try, try again. A lot has changed in a year. A lot has changed in three months!
There is something else too. We, in the real estate profession and you all, in other professions, have been hearing for years about a “shadow inventory” of foreclosed homes that banks are just sitting on. There have been many rumours about a tsunami of foreclosed home that will hit the market any minute now! True – there are many homes that are foreclosures still moving through the gambit to get to the market where they are available for purchase, but we have never seen the huge release that has been the topic of speculation and high hopes. But something has changed…
I am not seeing hundreds and hundreds of homes being released on to the market in ginormous batches, an event that would most certainly make any Realtor selling in inner Southeast and inner Northeast Portland giddy with excitement and racing for their eKeys to get in to take a look, but there are a few REO brokers who have received interesting phone calls from their lender-clients recently, telling them to release all 25-30 homes they have been assigned, now. That is new.
And another thing – foreclosures available on the market for purchase haven’t increased much, BUT, foreclosure activity by banks has skyrocketed to the highest level we’ve seen yet. That means that while we’re not seeing a giant dump of foreclosures coming on to the market right now, we are seeing small dumps, and we know there are many, many more to come. Maybe they’ll arrive in small batches, maybe not. No one can really say with any authority except the banks who hold them. We only know they are there and that their numbers will increase sharply over the next few years if the dramatic increase in foreclosure activity we are seeing is ‘successful.’
And we do know this: statistically, a whole bunch of foreclosures on the market tends to cause home prices to trend downward.
If you are thinking about selling, I would do it now, while there are relatively few foreclosures on the market to pull prices down, while the market is heating up and Buyers have fewer choices and more competition between them, before foreclosures hit the market in any larger numbers than we currently have. Do not wait until Summer when your flowers are blooming. As a Seller you want lots of competition between Buyers and you want eager Buyers who want to buy your house, right now.
Everyone is looking for a good deal. Sellers want the highest price they can get for their homes. Buyers want to purchase a property for as little as they have to spend. Buyers also want something else – they seem to prefer homes with history, in decent condition, with owners who had a connection to their neighborhood. Flips are great, but my Buyers seem to prefer houses owned by people who actually lived in them.
Buyers, you are out looking at one of the best times in recorded history. Soon-to-be Sellers, Brokers are so looking forward to your homes coming on the market! Sellers, you listed at a good time and I am enjoying showing your homes to my Buyers. You must have done your homework, realized the bubble is over and we’re moving on to a normalizing market, and decided to list your house. I just wish there were more of you!
Amy Munsey, Broker, Realtor
Windermere Cronin and Caplan Realty Group, Inc.