Real Estate Information

I reviewed our market statistics for February 1995, to identify long term trends. Fifteen years ago we had 94 sales during the month as compared to 165 for February 2010.   The average market price increased from $116,100 to $179,900.  The average sales price for one year ago was $181,500.   We can draw the conclusion that the Tri-City area is experiencing slow consistent price increases.  This slow appreciation has contributed to our stable market. While many areas in the US were experiencing double digit appreciation our market was increasing at rate of 2-3 percent.   The same areas with rapid appreciation are those experiencing drastic declines today.

Our absorptions rates increased slightly for homes priced below $200,000 last month.  These homes are now in normal market situation.    Homes priced above $375,000 continue to be in an oversupply situation. 

The Tri-Cities rental market is very active.   It’s very difficult to find a three bedroom apartment and where they exist, waiting lists are present.

With interest rates at historically low rates, this is a perfect time for those eligible for tax credits to purchase.    First time and previous buyers, who qualify, must have a contract written by April 30, 2010 and close prior to July 1, 2010.

Last week I viewed a presentation by Lawrence Yun, the National Association of Realtors Chief Economist.  Some of his comments are as follows:

• It has been a rough four years for the housing recession.
• 2009 experienced more sales than 2008; however the prices were lower during 2009.
• Yun is projecting a 15% increase in residential sales for 2010.
• The first two quarters will benefit from the housing tax credit.
• The final two quarters will benefit from job growth.
• Increase pressures on residential housing will be affected by 16 million renters who have the ability to purchase a median priced home in their areas.   Many of these renters are waiting and watching the market.
• The US population growth is about 3 million each year.
• In many markets prices have overcorrected and are now starting to rebound.
• We have a 6 month supply of houses which means that we should start to see annual appreciation rates of 3-5% for years to come.
• Interest rates for fourth quarter of 2010 most likely will increase to 6%.
• Foreclosures for 2010 will be similar to 2009.  These foreclosures are based upon sub-prime borrowers making loan previously they can’t afford and strategic defaults (home owners who can afford the payments, but are discouraged about reduced property values and stop making payments).
• Foreclosed properties are selling much faster than they did in 2009.
• Commercial real estate will have a bad year in 2010.  Commercial values have fallen 40%.  This situation presents a buying opportunity for those with cash.  
• Temporary employment is rebounding and should precede permanent jobs.

If Lawrence Yun’s predictions are accurate, now is the time to purchase homes in the lower price ranges.  Once jumbo interest rates decline, home buyers in the upper price ranges should start buying.  For those with cash, purchase commercial properties at a discount.

I have noticed an increasing use of professional home stagers during the past year.   Many times they are used when a home is vacant.  Other times the stagers assist home owners removing clutter and using furniture that best show cases the homes.  Many agents including me offer the use of a free DVD that provides great guidance on preparing a home for sale.

Home Buyers continue to be highly emotional when they are viewing homes and ultimately identify the home that best meets their needs. It is absolutely critical that a home show well to receive top dollar and sell in the shortest time possible.

A few weeks ago, I recommended to a future home seller that the master bedroom floors be repaired to eliminate squeaking.    The subfloors were not properly secured.   The home owner thought this was a useless repair and if necessary could be done prior to closing.  My observations are that if one hears excessive floor squeaking, this causes doubt with the potential buyers and causes them to ask, “What else is wrong with the home”?

One has to ask why car dealers try to keep their autos extremely clean so they show well.  They don’t let the vehicles accumulate dirt and then offer $20 to have the vehicles washed after purchase.  The marketing principles are the same for housing and autos.

While many parts of the nation are experiencing a soft housing market, the Tri-Cities reported a very good year for 2009.  We experienced a 10% increase in sales from 2008 to 2009. Both the average sales price and median sales price were higher for the Dec 2009 as compared to the same month during 2008.  Unless we start to see more listings in the lower price range, we could have a housing shortage.  Regional builders who do their own land development and specialize in the lower price ranges must have experienced terrific sales.   

Our December 2009 statistics indicate that all price ranges to $325,000 are leaning towards a “seller’s market”.  Above $325,000 we have a market shift towards a “buyer’s market".   Builders who build in the upper price ranges should be cautioned to be conservative in the number of homes built until the market has a correction.

I believe our market has been positively influenced by the tax credit and stimulus money for Hanford Clean Up activities.   It will be interesting to watch the market after the tax credit period expires. 

For addtional information go to www.Key2Homes.com

The Tri-Cities Building Association reports building permit activity during the year.  Since 2005 we experienced a decline in new construction through 2008.  Last year had an 8% increase in new construction over the prior year.   The City of Pasco continues to lead the growth in the Tri-Cities.  The following chart illustrates the decline followed by growth.

Twenty years ago I started a second career in Tri-Cities WA real estate. When Sue and I arrived, we found housing availability to be very limited.  Our housing acceptable options were six or less.   Little did we understand that the Tri-Cities was about to enter a major growth phase.  New construction has been very active for the 20 years.    We have seen three new high schools open during this period.   The number of real estate agents has tripled.

During the last ten years, Tri-Cities population has increased by 35%.  Kennewick and Richland increased by 23%, West Richland by 39% and Pasco by 70%.  Today we have approximately 180,750 residents in the local area.  With a more diverse economy, we should continue to enjoy another 10 years of prosperity.

Happy New Year!

Earlier this month, I attended a regional motorcycle show in Seattle.   I was disappointed at the number of dealers and venders in attendance.  It was about ½ the show attendees as the previous year.  I met a Tri-City friend at the show and he indicated that he recently attended a wood working show and it was the same poor attendance.  These shows are a reminder that the economy in the US is simply not strong.

We in the Tri-Cities have enjoyed a robust economy during 2009.  Our economy became the Number One Story among the Top Ten identified by the Tri-City Herald.  Business Week ranked the Tri-Cities the third best place in the nation for people battered by the ongoing recession to make a fresh start.  Business Week’s report identified food processing, professional and business services, education and health services, leisure and hospitality and government sectors for providing potential job opportunities.

 In addition to a strong economy, we have enjoyed affordable housing as reported by Washington State University.  The Council for Community and Economic Research has consistently reported the Tri-Cities as among the least expensive places to live in the Pacific Northwest.

Two thousand nine has been a superb year and we look forward to 2010.  

President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 into law November 6, 2009. The legislation greatly expands the First Time Homebuyer Tax Credit by making more first time homebuyers eligible for the credit and now includes homebuyers that are not first time homebuyers.  

First Time Homebuyers

The current law is extended until April 30, 2010. Buyers have until that date to have a signed purchase agreement. There is an additional 60 day grace period to complete the financing. More first time homebuyers are eligible because the new law raises the annual income limits from $75,000 to $125,000 for singles and from $150,000 to $225,000 for married couples.

Current Home Owners

Over 60 percent of current home owners will be eligible for a tax credit of up to $6,500 if they purchase a home by April 30, 2010. These homebuyers must have lived in their home for five consecutive years over the previous eight years to qualify. Qualified homebuyers can get the credit if they purchase a home for $800,000 or less as their primary residence between November 7, 2009 and April 30, 2010. The income limits are the same as the First Time Homebuyer listed above.

Sunday I was reading the Business section of the local paper.  It contains a segment on Money Rates in the Tri-Cities.  The article has a table listing mortgage rates for various Tri-City banks. I believe this table is of limited value for two reasons.  One is that interest rates are dependent upon credit scores.  I can only assume the published loan rates are for those with the best credit scores. 

Secondly the annual percentage rates (APR) are dependent upon loan origination and processing fees.  When a present or future home owner combines the loan rate with the loan origination fees, the annual percentage rate (APR) is identified.  The APR is the rate that really informs the consumer about the price of the loan. Therefore, it makes more sense to publish APR’s.  This is the standard for comparisons.   Always ask your lender for the APR and compare this rate with other lenders.   This is a service performed by many mortgage brokers.

The real estate market follows the jobs.   Where the economy is strong, the housing situation is normally healthy.  The Tri-City Development Center (TRIDEC) reported that The Department of Energy is predicting that employment at the Hanford Nuclear Reservation will peak during fiscal year 2010.   Following the peak of about 10,800 workers, we should experience a gradual decline in Hanford employment to the year 2050 where we are expected to have about 2,100 workers dedicated to the project.  The project has the mission to clean the area of wastes and to restore the Hanford Area to a near pre-World War II status.

 During these 40 years, I expect our economy will continue to thrive in other areas.   The Pacific Northwest National Laboratory is expected to continue with its growth pattern. Presently the Laboratory has gone through missions changes from Hanford support, to home land security to most recently energy improvements. Agriculture and transportation are expected to continue their growth patterns.  Engineering and construction companies will continue to find the Tri-Cities an excellent place to locate.