Seattle Makes another Top 10 List

Seattle made another top 10 list this week. Unfortunately, it was the Forbes list of Top 10 Least Affordable Cities. According to the Forbes article,

"A lot of it has to do with regulations and zoning," says Robert Bruegmann,
a history and urban planning professor at the University of Illinois at Chicago.
"The higher cost of doing business--and the uncertainly of business--in places
like California drives up home prices. The cost of building isn't that different
in Houston versus Los Angeles, yet L.A. prices are so much higher. ... One of
the few variables you can look at is regulatory burden."

...Unaffordability is also relative. Few residents of Sacramento,
Calif., and Seattle can afford homes in the areas, but property there is still reasonable by regional standards. Both cities are experiencing strong growth and immigration patterns, in large part due to the fact that they're less costly than West Coast cities like San Francisco, San Diego or Los Angeles...

Forbes' criteria for unaffordability is what percentage homes recently sold would be affordable to a family earning the median family income. Here's how Seattle stacked up:

Median household income: $67,870
Recent affordable home sales: 22.6%
Price-to-income affordability: Eighth worst

The news is not all doom and gloom however, as Seattle also recently made Forbes' list of Best Cities for Young Professionals, ranking 7th, based on ability to attract and retain graduates from top universities nationwide. Our strong hiring market and relatively low cost of living as compared to other similar cities (think New York, LA and San Francisco) still make this area one of the best choices for career-oriented young people.

The best take-away from this is that if you are considering a move to the Seattle area, your best course of action is to take housing prices into account when negotiating your salary. For those moving here from San Francisco and other areas in California, housing prices here will probably seem refreshingly low, but if you're moving here from the Midwest or Mountain States, plan to spend at least 10% more of your annual income on housing, and negotiate for salary accordingly.

North Sound Round Up, Part Two

Mukilteo's mayor got a raise, but the pay is still less than the mayors of other nearby cities of similar size, and by my estimation, he is also paid less than the salary of a good administrative assistant. Now, I don't purport to be an expert, but I am thinking the job of mayor is more complex, by far, than what your average administrative assistant would be expected to handle.

Part of the issue with bringing the pay scale for the position of Mukilteo's mayor in line with what a mayor of a city this size would be expected to earn, is the question of whether or not the job should be a full time one or not.

According to Mayor Joe Marine, the job is effectively a full time one whether it's paid as such or not. Others in the community feel that the mayor's job should remain a part time position. When Marine was elected, the position was understood to be a part-time one so some people feel that when Marine chose to run for the office, he should have been prepared to do what he was elected to do based on the pay scale as offered.

I think there is probably some merit to that argument, but on the other hand, I think this is part of a larger problem that the city of Mukilteo seems to have with adapting to change. It seems to me that what once worked for Mukilteo as a small town, can't be expected to work as the city continues to grow. The last 20 or so years has transformed what was once a sleepy little town into now a fairly large suburb. And I would expect that the growth will continue with the healthy economy that we enjoy. So, pretending that we are still a town too small to need infrastructure, to need planning, and to need full time employees to help manage the growth that we are experiencing, seems rather short sighted to me.

Now that I've thrown my hat into the ring on THAT little argument...

Across Puget Sound from Mukilteo, the Clinton ferry terminal on Whidbey Island has been renamed for late Washington Senator Jack Metcalf. I had the good fortune in my life to be acquainted with Mr. Metcalf growing up on Whidbey Island. He was a good man--had a farm not far from our home in Langley and I have fond memories of going to his farm to buy fresh, unpasteurized milk. I also experienced electric fencing for the first time on his farm! He was described by the Seattle Times as "having a reputation for independence and quirkiness." Sounds like a Whidbey Islander to me!

Finally, a real estate tidbit from the Zillow Blog. Today's post called, "Selling or Buying, Better Check that Calendar!" talks about the best time to list or buy a home. No, they are not talking about which month of the year is the hottest buyer's or seller's market. The topic is what day of the week, is the best time to list or make an offer.

Best time to list? Thursday morning. List any earlier in the week and your listing is stale by the weekend. Wait any longer, and you could miss some of the buyers that are searching for homes to tour that weekend. Thursday also gets you on the hotsheet for the buyer's agents that are planning tours for their clients.

Best time to buy? The first Tuesday morning of any month. Why? Because sellers will have just paid their mortgage on the first of the month (ouch!) and by Tuesday they will have given up on receiving any other offers based on the previous weekend's showings.

I think these are interesting thoughts, but there are a couple of other things that clients need to consider. For instance, when listing your home in my area, a Thursday listing will eliminate the possibility of getting your home seen on our Broker's Open, since those occur on Thursday. And in my office, our office tour is Wednesday, so a Thursday listing would mean that clients wouldn't be able to be on tour until the following week.

Northsound News Round-up

I'm a bit short on time today, but I've been saving up tidbits for the blog in my Google Reader, so I'm going to round 'em up and head 'em out!

This year's Seattle Street of Dreams home show is now in progress. This SOD differs from previous years in that the show is incorporating a focus on green building techniques. Though the homes featured are still large by any definition and of course they feature all manner of bells and whistles (this is about dreams after all!) , square footage is capped this year at just under 5,000 asf. Street of Dreams takes place in Quinn's Crossing, a community of 48 homes near Maltby.

Redfin has announced that it has received $12 Million in VC funding from Draper Fisher Jurvetson, and is now open for business in the Washington DC market. This has been covered with varying degrees of seriousness all over the blogosphere, but I'm going to chime in with my own two cents here anyway.

The real estate industry today reminds me very much of the IT industry about 8 or 10 years ago. I was involved in that industry at that time, and I recall that retailers were very concerned that their brick and mortar business model was doomed to go the way of the dodo, with the advent of companies like Amazon.com, Drugstore.com, etc. There was a huge influx into the Internet marketplace of online retailers and discounters. Some of these retailers have lasted, and others burned bright and flamed out.

Take as an example, HomeGrocer.com. The media played it up that ordering groceries online was the wave of the future, and competing grocers were concerned that it was a threat to their business model. HomeGrocer soaked up huge amounts of VC funding, but never turned a profit and eventually went out of business.

Even those pure-play dot-com retailers that outlived the dot-com bust, such as Amazon, still struggle. Meanwhile, those companies that effectively combined the best of the web with a brick-and-mortar presence eventually won out. Look at Nordstrom--fabulous website, and fabulous service whether you visit their store online or in real life. At Windermere, we often look to Nordstrom as the gold standard of service and what we should aspire to in our business.

The major real estate brokerages had it good the last few years, with lots of easy sales and plenty of cash to go around--very reminiscent of the 90s dot-com boom. The industry has NOT been quick to adapt to changes in the marketplace but by and large we have a business model that still works. It could be more consumer friendly, and we need to be more proactive about adopting technology.

Technology will revolutionize real estate and the way we do business will change. But the real estate agent will survive, even if we do our jobs somewhat differently, because we provide a service that people want and need. Maybe not EVERY person will need a real estate agent in the future, but enough of population values what we do that we are in no danger of following the dodo into extinction. Though, I would say that the easy money of the last few years has inflated our ranks, and it's likely that there will be a thinning coming. And frankly, it will be good for the industry to have that happen.

What I hope from all this is that companies like Redfin will help the industry move in a more consumer-friendly direction, and that it will force the industry to embrace change, rather than resist it. But will Redfin be the one to outlast the field? I don't think so. They just don't seem to have a business model that will take them to profitability, and they don't have the kind of universal appeal that will allow them to work with the population at large. They are and will always be a niche player. But we do NEED what they are bringing, even if we don't always like it.

Okay, moving on!

There's been ongoing talk of converting the Smith Tower office building in Downtown Seattle into condominiums. Looks like we are a step or two closer to having that happen. The developer is down to the last city approval before they can move forward with the project. Seems like that would be a pretty cool building to live in, if they can upgrade the systems to modern standards. In particular, a faster elevator would be good! And it's a great way to preserve an important piece of Seattle history.

Last item. 3Oceansrealestate blog ran a great feature this morning on how to know when it is the right time to buy a home. Regardless of what the market may or may not be doing, here are the factors buyers should be thinking about:

• You found the home you really want and you can see yourself living
  there.
• It’s affordable.
• You can get a reasonable loan.
• It will serve you and your family for years to come.
• You’re not looking for perfection.
• No home is perfect.
• You’ve given up trying to beat the market.
• You’re comfortable with your compromises, whether it’s location, size,
  price, features, or condition.
• You’re confident the home you’ve chosen is desirable enough that you will be
  able to sell it in any market.

While it makes sense for investors to try to time the market, with home-buyers, it makes less sense since you are talking about a longer holding period, and also, there are other reasons--tax relief, pride of ownership, stability, etc.-- to buy besides the investment possibilities.

Okay, that's it for today. I. Am. Outta here!

10 steps to improving your credit score

1. Pay off or pay down your credit cards. However, do not consolidate your credit cards or close accounts. Pay them off or down, but keep the accounts open. Length of established credit is one of the criteria that affects your credit. Longer is better.

2. Make payments on time, every time, even if it is just minimum payments. Responsible credit behavior over time is what the credit agencies want to see. It will take about 2 years of consistent effort to improve a poor payment history. Collections, judgements and other such actions will take about 7 years to age completely off your credit report. Two years of responsible credit behavior, however, should be enough to go from bad credit to reasonably good credit.

3. Your FICO score depends in in part on the percentage of available credit used. In this post by Ardell, she explains how the percentage of used credit affects your score. This is important information. Basically, for every 10% of your available credit that you use, you will lose 10 points on your FICO score. That means 50% of available credit used costs you 50 points--depending on your score this could mean the difference between "A" credit, and sub-prime. Paying off or paying down your credit card will make a substantial difference in your score.

4. Don't open a lot of new accounts at once, and don't make a lot of credit inquiries (such as on purchases of cars, boats and homes where your credit report will be "pulled") within a short period of time. These will affect your score negatively.

5. If you are having trouble making ends meet, call your creditors and see if there is a way to work out a payment schedule or lower your payments. You can also meet with a credit counselor, but make sure they are a legitimate credit counseling agency. If you're wondering how to know whether a credit counselor is legitimate or not, read this article from the Federal Trade Commission.

6. If shopping rates for a new loan, do your rate shopping within a short period of time. This will tip off the scoring system that your rate shopping is for a single loan, rather than several and it will have less of a negative impact on your score.

7. When checking your own credit, the best way to keep the inquiry off your credit score is to order your credit report directly from the credit scoring agencies. Lenders will often be willing to pull your credit report for free but be aware that it does show up as a loan inquiry on your credit.

8. Don't open new cards just to have additional credit, or thinking that this will have a positive effect on your ratio of used to available credit. Using credit responsibly means using it only as necessary and not getting overextended with your credit.

9. Keep your balances as low as possible. Yes, this is basically a reiteration of the point about paying down your balance and using credit as little as possible, but the higher your balance, the lower your score will be. The very best credit behavior is to pay off your balance every month.

10. Use credit, but use it responsibly. Credit scores treat someone with no or very little credit history as a higher risk than someone who has shown they are able to have credit and use it responsibly. So, it's not necessary to close your accounts or try to live a credit-free life, you simply need to remember that your credit score reflects the credit establishment's assessment of your past handling of credit, and the likelihood based on your past credit behavior that you will pay back your obligations on time. If you treat your credit responsibly over time, you will have demonstrated to lenders that you are a good risk. This takes time, but is worth the effort.

Mukilteo Market Stats - June

Here are the market stats for the month of June in Mukilteo.

Sales activity was strong, with twice as many properties going under contract and closing in the month of June as were listed. However, we had a fairly large backlog of inventory coming into June, so even with the increasing sales activity, we still have a 2 month supply of inventory as of June 30.

As an aside, we calculate supply by looking at the number of listings on the market and dividing by the number of listings that went under contract or sold during a given period. Last month, we had a 2.5 month supply of inventory, which means that at the current rate of sales, it would take 2 fewer weeks to sell through the entire stock of housing inventory in Mukilteo than it would have during May. This tells us that things have in fact picked up for the summer.

I would classify this as a healthy market, if somewhat slower than last year (last year we only had about a 1 month supply of inventory). A balanced real estate market (a market that is neither a buyer's market nor a seller's market) occurs when there is about 2 to 4 months of inventory, though some would classify as a buyer's market any inventory levels of more than 6 months, and a seller's market as inventory levels of more than 6 months. Clearly, here in Mukilteo we are in a balanced market that leans towards still being a seller's market. But, with inventory levels up over the last two years, buyers definitely have more leverage than they have had in some time.

One sector of the market that plays a big role in how days on market numbers as a whole pan out is properties over $1,000,000. These properties comprise about 10% of the market in Mukilteo, and typically, we expect to see longer market times in this sector of the market. And this is what we are seeing. Currently, it is taking an average of 130 days to get properties in this price range "under contract" and it is taking an average of 139 days to get them to sell. But we have several properties in this price range which have been on the market in excess of 250 days, which has increased days on market figures for Mukilteo as a whole.

That's my analysis, here's the data. All statistics are hand calculated by me, using NWMLS data, and include Mukilteo (in city limits) ONLY for the period June 1, 2007 through June 30, 2007:

Active Listings
Listing Count: 92 (this includes ALL listings currently on the market, regardless of date listed)
Average Time on Market: 88 days
Median List Price: $622,475
Average $ Per Square Foot: $259

There were 25 new listings in the month of June

Under Contract (includes Contingent, Active STI and Pending)
Listing Count: 21
Average Time On Market: 55 Days
Median List Price: $579,900
Average $ Square Foot: $252

Sold Listings
Listing Count: 29
Average Time On Market: 123
Median Sale Price: $620,820
Average $ Square Foot: $238

This graphic shows the breakdown of time on market for properties currently listed. Last month, about 54% of our inventory was less than 30 days old. This month, we are seeing more balance between new and older listings.

Your credit score

Following on the tails of last week's post about lease-option purchases, I wanted to say a few things about credit scoring and what to do if you are thinking of buying a home but are faced with credit challenges.


The first and most important thing you can do, is sit down and get a full understanding of your situation. People are very funny about their credit. Some people with clean credit think that they have terrible credit (they were late with a payment once, 5 years ago, and think that the lender will never forgive them for it!). Other people have terrible credit and are completely oblivious. But one thing I've noticed is that when people have credit problems, they are sometimes so afraid of what they will find on their credit report that they choose not to find out what their situation is by getting a copy of their credit report.

This is like thinking you have AIDS and not getting an AIDS test. Realize that getting a copy of the test, or your credit report will at worst confirm your suspicions. Best case scenario is that you find out you were worried for no reason.


Anyway, it's important to face the music about this. Only when you understand the problem can you create a plan to solve it, and only with a plan can you put this problem in your past. This is about gaining control of your financial life, and the fact that you have bad credit is not an indictment of you as a person. I'm not sure that it's fair to say that everyone has had credit problems, but certainly, there are many people out there who have faced these problems and successfully put them in the past.


So, the first thing you should do is get your hands on a copy of your credit report. Sometimes if you are really upfront with a lender about your situation and tell them that you want to work on your issues, they will pull a copy of your credit for you at no charge. If you are not comfortable with sharing this information with anyone else, you can also order your credit reports from MyFico.com for about $16 dollars.


Go ahead and order reports from all three credit bureaus--Experian, Equifax and Transnation. It sometimes happens that things show up on one bureau but not on another. At this point, you want to know everything, so get a report from each bureau.


Now that you have the reports, you need to understand how your credit score affects you. First thing to know is that your lender is going to qualify you based on your middle score. That is, if you have scores from the 3 agencies of 650, 690 and 700, the lender will use the 690 score.


What does that mean? The lending industry is always changing but typically if you have a score above 680, you are what most lenders consider a pretty good credit risk. You should be able to qualify for better rates, and you should have many lenders and loans to choose from. Between 620 and 680, you are considered to have average credit. You can get a loan pretty easily but your rates won't be as good as "A paper." Below 620 but above 580, you are what most lenders call "C paper." You are falling into the subprime category--fewer loan programs to choose from, and the lenders see you as a higher risk so they charge a higher rate of interest.


Recently, the sub-prime and prime lending markets have really tightened up, because many of the subprime loans written under the lax lending standards of the last few years have gone into foreclosure. Because of this, there has been a shift away from sub-prime and back towards safer government loans such as FHA and VA for people with credit issues. These offer fairly competitive rates and can be good for people with credit challenges.


In my next post, I will talk about how to improve your credit, and how long it takes for changes you make now to take effect.

Choosing Sides

One of the not-so-great things about working in the particular market that I do, is that because a lot of the homes out here in the 'burbs were constructed within the last 15 years or so, we see a lot of the faulty construction issues that were common during that period. The major one being LP siding.

Today I had the interesting experience of touring 2 homes in succession that had failing LP, and in both cases neither the sellers nor their agents were aware of it. One agent claimed that it couldn't be LP, because the house was built in 1988, and LP was only sold in 1994 - 1995. In fact, the product was sold and put on more than 800,000 houses nationwide between the period of 1985 - 1995. The earlier product, that is, pre-1992, was the most prone to failure, so in fact, this agent's house is a sitting duck, and he just doesn't know it yet! But, since the failure of the siding is plainly visible to the untrained eye (i.e., mine), I'm sure he will soon find out...

As a Realtor, it only takes one listing with LP siding for you to become something of an expert on the subject because it can be the cause of so much heartache for your sellers. Heaven help the naive seller and agent who go merrily traipsing along, assuming that because the LP "looks okay" to them, that all will be well. There are a lot of different stages of failure, and some are not immediately apparent. The process of breakdown begins with tiny cracks, and without vigilant maintenance of the LP, you may have these cracks which allow water to seep into the siding, and not even know it.

I think it usually pays to know what you may be looking at up front, so a pre-inspection of the property can be beneficial, and having been through it once, I would now recommend any seller with LP siding have this done. In some cases, I can visually determine if damage exists, but I can't as easily determine the extent of the damage...or "how bad is it really?"

That's a big distinction, depending on whether the moisture has penetrated behind the siding and into the actual structure. Is it a matter of replacing all siding on the house, or is it possible to paint, seal and caulk the siding to keep minor damage from progressing? A pre-inspection can help answer these questions, and will allow you to formulate a plan to deal with the problem. The way I look at it, you'll either end up paying for it up front, or in the form of a price reduction or failed sale when the problem is uncovered.

In Washington state, sellers are required to disclose if there is LP (or and fiber-board type siding) on their home, and if the siding has begun to fail, most lenders will not lend on the home. (Clearly, the agent mentioned above either didn't read his seller's disclosure, or maybe the sellers don't know either! ) This can make it extremely difficult to sell, even if the siding only has minor damage, simply because most buyers do not want to put themselves in the position of buying a home knowing that there is a $10K-$15K repair job that will have to be done...and with LP and a lot of similar siding products, it is not a question of IF it will need to be replaced, but when. So, if a homeowner has this siding, they will most likely end up having to make some sort of arrangements to deal with this problem.

I guess the long and short of it is, if you are a real estate agent or a homeowner whose home contains these products, it pays to educate yourself about the products, know your options and have a plan for dealing with any problems that may arise.