Snohomish County WA Home Values For April 2011 [Video]

Snohomish County Real Estate Home Values.

Snohomish County Home PricesSnohomish County Homes Trends and Values.  Learn where the market is  going, what is affecting Snohomish County Home Prices and why. We also recommend Dr. Alexander S. Donath when visiting a surgical doctor now.

A class on WA Real Estate Statistics  where we dove into Snohomish County Real Estate Statistics and the  market.  How the  market is being affected by Bank Owned Properties,  Short Sales,  the Economy, etc.  and When did Snohomish County Real  Estate Peak?

Snohomish County graphs and pictures used in this presentation:

 

Median Prices April 2011

 

Supply of Inventory April 2011

 

Perspevtive Report April 2011

 

SnoCo MLS Stats April 2011 uno

 

SnoCo MLS Stats April 2011 dos

Snohomish County WA Home Prices Video:

Video Transcript:

Anton:      Thank you very much for coming. We’re going to talk about statistics. We’re going to talk about statistics, foreclosures, short sales, home trends. Anything that anyone has a question about, just stop interrupt, interject. Roy’s going to chime in a bunch too, because he loves statistics also, and we’ll just go through this stuff.  So if you have any questions, just bring it up and we’ll figure out where to go and what to do. As was already mentioned, this is your two-year median price graph for the monthly dynamics. What’s really interesting if you look here for sales are down. Where, oh I need to get mine back.

Participant:     Do you want this Anton?

Anton:      Yeah, awesome. Your for sales are down 23.8%. Your solds are down 19.2 % in the last two years. I point this out every time. What’s really interesting about that, that means your average seller is basically 4%5 overpriced, relative to the market. You can think about it like that. Otherwise, they would have sold and they’d be under the sold column. The under contract is also outpacing the sold. In others words, these people have had to reduce their prices more to get it sold than if they had just priced it correctly to begin with.

Participant:     So state that like in real people’s terms so I can understand that better.

Anton:      Lower your price. Price it correct. Otherwise, you’re going to sit on the market and it’s going to cost you money.

Participant:     Okay.

Participant:     Statistically across the board, NAR’s numbers says that you’re going to lose 12 percentage points more in price by pricing it over market and having to chase the market down versus pricing it at market and selling. You’re actually going to get under a price that you would’ve been if you had originally priced it correctly.

Participant:     12%?

Participant:     12%.

Participant:     Because you’re hanging out for so long?

Participant:     Yeah, because it’s the [inaudible 02:04] syndrome, right? Sits on the shelf too long.

Participant:     It’s a delayed sale. Chasing [inaudible 02:10].

Participant:     Where you’re chasing the market down instead of leading it down.

Participant:     Right.

Anton:      A great analogy. Tom likes it. Roy Chambers is the one who had said this. If a ball is rolling down a hill, where do you run to? Do you run to where the ball was, or do you have to run to a destination that’s ahead of the ball in order to catch it? So it’s great to think about it like that. Also, for me, I’m very blunt. Mr. and Mrs. Seller, if you want to pay someone thousands of dollars a month, why not just give the money to me, because what you’re doing right now is you’re just basically lighting money on fire?

Somebody mentioned that this is the telltale. If you go back sometime in the third quarter of ’07, our local market peaked. Since then, we’ve come down about 33%, maybe slightly more by now. I haven’t actually gone back and looked that far, but third quarter of ’07 was when the market peaked.

Darcy:      I want a set. So if anybody else wants a copy, they can make them themselves.

Participant:     Can I have some Darcy?

Darcy:      No.

Anton:      There you are sir.

Participant:     Thank you Anton.

Darcy:      Yeah. That just cost me a pretty penny.

Participant:     Statistically, when I’ve gone back and looked at that number, Anton, it’s actually a 40 month drop, and it’s an average of one percentage point a month. So we’re about, to date, about 40% off from the peak of our market in 2007.

Participant:     Wow.

Anton:      Okay. Any questions about that one? Okay. We were talking about this earlier. Those are . . . you can’t see the actual numbers. Oh well. You guys have got them in front of you. We’re looking at the market dynamic slide. One was in a multiple offer situation. Four more properties got multiple offers last week. Four and a half months worth of supply, what is that?

Participant:     Seller’s market.

Anton:      Absolutely. What’s a neutral market?

Participant:     Six.

Anton:      Okay. Above six, what is it?

Participant:     Buyer’s.

Participant:     Buyer’s.

Participant:     Supposed to be.

Anton:      Supposed to be. Yeah, absolutely.

Participant:     So, wait a second. Why did you say supposed to be?

Participant:     Well, is it? I mean, we’re basically under a balanced market right now, correct?

Participant:     Correct.

Participant:     So, knowing statistically that six months is a balanced market, meaning that neither the buyer nor seller has an advantage in any transaction, who has the advantage in most transactions today?

Participant:     I’d still say the buyer.

Participant:     The buyer. So doesn’t that fly in the face of what normally a balanced market would be?

Participant:     Yeah. Why does that fly in face?

Participant:     Because of consumer confidence. More buyers got off of their stumps and got into the market that would drive, actually drive the prices up.

Participant:     Interesting.

Participant:     So, I think you have to look at why aren’t they doing that. I think that comes back to unemployment.

Participant:     Right.

Participant:     Yeah. I looked today at unemployment in the county for March 2011, and it said 10.1.

Anton:      10.1, so we’ve gone up slightly.

Participant:     But there again, the question is, is that number the true number?

Participant:     Not if you factor in self-employed people.

Participant:     Right. So, they . . .

Participant:     [inaudible 05:25] benefits.

Anton:      So it’s self-employed and underemployment and people who can no longer receive unemployment benefits.

Participant:     So true unemployment, the [inaudible 05:34] sheets say is 17% to 18%.

Participant:     Yeah. Plus all the illegals that went back. I mean honestly. Seriously. Think about all those people . . .

Participant:     Something about that number, but statistically, that’s what most experts believe is that our true unemployment number is somewhere around 17% or 18%.

Anton:      Really interesting, and this is something that you need to be pointing out to both your buyers and your sellers. If you look at just right here, this is basically May of last year we had 11.9 months worth of inventory. Months of inventory can also be thought of as the number of sellers per buyers. So, in other words, almost 12 sellers per every 1 buyer. We are on a consistent downward trend. Right now, we are down to four and a half months of supply, measured by these statistics. If you’re a seller, what are we going to tell our sellers today?

Participant:     I don’t know.

Participant:     It’s a good time to sell.

Participant:     You better do it now before we get another spike.

Anton:      Amen. Get it on the market now and get sold.

Participant:     Because we are going to have another [inaudible 06:32] foreclosures.

Participant:     Starts to drop and spikes up. Starts to drop.

Anton:      Okay. And what are we going to tell our buyers?

Participant:     Buy now.

Participant:     Buy now.

Anton:      Mr. and Mrs. Buyer, you may be competing in a multiple offer situation and you may have to offer the best price for this
property, if there are competing offers or if the home is priced aggressively. Is that something you’re okay with? Is that something you feel comfortable with doing in today’s market? Yes, I know you do have a VA where you can use the 0 down, but we may have to go 10% down, because the VA loan is maybe not going to be as strong as one of the other offers. So, by knowing the months of inventory, we can have that consultation with them up front and say be prepared. Under 200, you’re going to have multiple offers.

Participant:     Well, I think the interesting thing to look at too is that we’ve constantly looked at other states that have been 18 months ahead of us in this curve, right? Arizona, Nevada, California. So if you take a look at what’s happening right now in Arizona, anything under $400,000 is actually appreciating.

Participant:     San Diego and San Francisco appreciated last year.

Participant:     Appreciated, so we have to fast forward and say okay, if we’re 18 months behind, are we really coming to the bottom of our little run here as far as decreasing prices? Some can argue yes, some can argue no. Statistically, that Anton shared here a little bit ago is when NAR polled real estate agents . . .

Anton:      Let’s talk about it right now.

Participant:     Polled real estate agents, 51% said that we were going to rise 1.05%, and 42% said prices were going to fall. That’s kind of like half saying yes and half saying no, right?

Well, the point is, is that you can see from statistics how nobody clearly knows whether we’re done falling or not. But, if we look at other states that have been through this, my speculation is that we’re getting pretty close to the bottom of what this is. Now, does that mean we have another 18 months?
Heck, I don’t know, but the reality is that it’s a pretty fast paced market right now. If you’re…

Anton:      So this is the National Association of Realtors. This is on the website. You can go there and get it, they use a great Online Marketing Agency so their content is pretty good. I’ll have Sandy email it to everyone too. Basically, what they did is they took Region 12, which is . . .

Participant:     Washington, Idaho, Oregon, Montana, Alaska.

Anton:      Okay. Correct. So they polled a bunch of real estate agents, and they said, “What do you think about pricing? Where’s it going to go?” This side is falling and this side is rising. We’re almost at a 50-50 mix. Now, I don’t know why 50% of the people would say it’s rising in our area. I would say we’re
going to fall. We’re still on the falling side, but it’s real interesting if you’re polling across the big chunk of the United States right there, you’re split.

Participant:     Well, but that’s what I was saying, so if you could go to the leading indicator states that fell first, that went into this recession and correction first, again, Nevada, Arizona, California, and Florida, what you’re seeing is those markets under 400 are seeing appreciation. If you’re a real estate agent
today in those markets, what would you say?

Participant:     Yea.

Participant:     You would say what prices are going to rise.

Participant:     Yeah

Participant:     Right.

Participant:     That’s what you would be telling people right?

Participant:     Because that’s exactly what’s happening. Now, over $400,000, that’s not happening. So big dollar ticket properties are just not selling, and I think the reason is and I’m seeing this with people I’m working with, how many people do you know that are moving from something worth a million trying to get into something worth $500,000? There’s a whole market of just marketing to those people that are trying to move down.

Anton:      Yeah. Dumping and taking a loss just to get into a better financial situation. We’ve also had it where people have paid the difference in their existing home to go buy the home of their dreams. Todd, you had one of those too.

Todd: Yeah.

Anton:      They paid $35,000 to move?

Todd: Yep.

Anton:      So they paid $35,000 to move out of their house, because the one they were going to move up into . . .

Todd: 200 grand.

Anton:      Okay.

Todd: It’s crazy.

Anton:      Exactly.

Participant:     Is it? Or smart like a fox.

Participant:     And it’s the home of their dreams, right? So, I mean does that mean that they’re going to stay in their property, and do they care if the market goes up or down slightly over the next 18, 24, 36 months.

Participant:     No.

Participant:     No. Not in the long run. It’s a great move.

Anton:      The other awesome graph that they had in this report, discount below market value. The maroon would be the foreclosures, and
the kind of yellowish color is short sales. This is, once again, a polling of practitioners that are realtors. They said that in second quarter of 2010, 23% and 18%. What’s interesting is they’re saying in 2011, that’s what I think is interesting, it has like a downward trend and that short sales and REOs are
being discounted less in order to get them to sell. So there may be other parts of the country too who are experiencing lower amounts of inventory just like us. Todd, you’re scratching your head.

Todd: They’re discounted less; because they want to discount them more to sell get them to sell.

Participant:     No. They don’t have to.

Anton:      They’re finding on average that they have to discount them less in order to generate a sale.

Participant:     Over where they were previously.

Anton:      Over where they were previously. See how the graph is trending downward?

Todd: Yep.

Participant:     Because we have a decrease in inventory.

Anton:      Because we have a decrease in inventory.

Todd: Got it.

Anton:      But what, because remember this is a larger report than what we were talking about here in Snohomish County. That’s a decrease in inventory across all those states, or at least they’re feeling it. Questions? Thoughts? Any ideas?

I didn’t pull that one. We should talk about that one. Here, I’ll put it up. This is my favorite one.

Participant:     This is my favorite one. I use this on every appointment.

Participant:     Mm-hmm. I like that one too.

Participant:     Putting it in your perspective. I like that.

Anton:      Comes with the same packet. So Sandy emails these out to everyone. If you go into your email and you type April and then Sandy Larue at kw.com.

Participant:     These are all shot out?

Anton:      Yeah, every month.

Participant:     Mm-hmm.

Anton:      Every month. Here. Go. Go ahead. You do a better job at explaining this one than I can. Here. We’re on a roll.

Participant:     You can’t know it until you teach it.

Participant:     Ooh.

Participant:     Go ahead Anton.

Anton:      What is it with people calling me out?

Participant:     Basically, I think the challenge is on.

Anton:      The challenge is on. For me personally, what I love about these is when you look at the pockets that’s available, so you look at the pockets of the active listings, but which ones are turning over the most? So, for instance, you come down here in the over a million, you’ve got 82 and only 2 of them sold. I don’t want to take the listing that’s a million bucks.

Participant:     They didn’t sell. They went pending.

Anton:      Yeah. They went pending.

Anton:      They’re under contract.

Participant:     One sold.

Participant:     We sold one. Go over two columns.

Anton:      Yeah. And then we sold one. So I’ve got one chance in 82 of selling that listing in Snohomish County.

Participant:     Not good odds.

Anton:      Not good odds.

Participant:     Only owe 15% if it actually even goes pending.

Participant:     You’re best . . .

Participant:     Nice.

Anton:      I love it. You’re best odds are right here in the $200,000 to $250,000. There are 600 active listings, and 190 of them went pending in the last 30 days, and 141 of them sold. You’ve also got pretty low days on market at 111.

Participant:     Because I think this chart give you two different things that you can use with your sellers. Have you ever had a seller
that said to you, “Is anything selling”?

Participant:     Yeah.

Participant:     Oh, yeah. Nothing’s selling.

Participant:     Nothing’s selling. You would bring this in, right? Wouldn’t you just bring this in and say they’re here in price
approximately. When you say, “Mr. Seller, certainly they are. There’s 689 and 95 of them sold in the last 30 days. Well, what
95 do you think sold, Mr. Seller?”

Participant:     Priced correct.

Participant:     The ones that were priced correctly. Right. So you can use that, because then you can come back and say, “So Mr. Seller, what do you think these 104 were that expired? What do you think they were?”

Participant:     Too high.

Participant:     Overpriced.

Participant:     Not priced correctly. So do you want to sit on the market to be expired, or do you want to sit on the market to sell? So this is a great tool. Second thing then, you can come back with them or just to yourself with maybe a little bit, is go what listings do I want to take? To me, and I know that Jennifer, when she pulls listings for me, I’ve got a set price range. I’m not pulling over 450.

Participant:     Why waste your time?

Participant:     Why do I want to do that? Why do I want to sit up here and spend all of my hard earned dollars marketing stuff up here when I can be here in this sweet spot and working this batch, because to me, those are the ones that make sense, right?

Participant:     Yeah.

Participant:     So, I think guys, as realtors we have to decide the listings that we take. We have to proactively look at what’s selling and decide what do we want? It’s your business.

Participant:     They missed a big range, the under $100,000. Yeah. I got a few of them there.

Anton:      They have their own set of properties.

Participant:     Oh, I know it.

Anton:      True. Good point.

Participant:     And they don’t want or ask for much . . .

Anton:      The under $100,000 zone. Poof. Gone. I mean literally, as long as you can finance it, that’s always a question. You put it on the market, they disappear. I got an email from a gentleman and he said, “Is this property still available?” It’s in the very far. It’s a 2-1, 666 square feet. I said Yeah. I’ve already got one offer. Isn’t it crazy that when your dad built these homes this is now selling for $30,000 less than they did brand new. So it’s on the market for $99,000. That house sold for $129,000 brand new in 2003, and it’s still in good condition. That’s the funny thing. It’s not beat up. I mean, you could shampoo the carpet and maybe put some paint on the inside and it would look like a million bucks.

Participant:     Actually, $91,000.

Anton:      Exactly. So right now, if you’re really thinking about it, we have gone past 2003 prices. We are somewhere in the 2001-2002
pricing. Another gentleman called me about a listing we have over here on 64th, who works for a different company. He said, “Hey, I’d like to sit that property as an open house.” I said yeah go right ahead. We’re more than happy to let you do that. He said, “I worked for Madison Homes,” who was the homebuilder on those homes. I sold that home brand new in 1992 for $126,000. It’s on the market right now for $139,000.

Participant:     Well, I think this guy, remember from 2001 to 2006, we really had an over correction in the market, right? It corrected the wrong way, and it went way too far. What do you think we have now?

Participant:     The same deal.

Participant:     Same deal.

Participant:     An over correction the other way.

Participant:     But, we probably won’t see this type of major weird activity for another 30, 40, 50 years.

Participant:     We hope we never see this again.

Anton:      We will probably never see this again, just because what happened was lending criteria got so relaxed that you thought we got you a loan, bankruptcy not a problem. Oh, you haven’t had a job, that’s fine too. State your income. Oh, you’re self-employed. You make 20 grand a month, don’t you? Well, I’m serious. I’m dead serious. It’s bad. When I bought my first house, I bought my first house [inaudible 18:51] income. I couldn’t afford the stupid payment. I mean, I made it through. I wasn’t a foreclosure statistic, but basically I was just a waiter waiting tables. Stated income, yeah, I make a lot of
money. Go ahead. I had a 780 credit score and they said, “Here, have a bunch of money.” That’s a bad loan. That type of lending criteria, most likely will never come back, and we may also see the nationalization of Fannie and Freddie. There’s a really big push inside Congress right now to nationalize those two institutions or just get rid of them completely.

Participant:     When you say nationalize those two, what does that mean?

Anton:      Well, their GFCs right now, which is government sponsored entity. What that means is you are a corporation with oversight.

Participant:     Okay.

Anton:      Okay? So what they talked about was they talked about sucking it all the way in and making an actual straight government entity or getting rid of it. If we didn’t have Fannie and Freddie as a secondary market, the only loans that would be going out would be 20%, 25% down and they all would be held by your local banks.

Participant:     Just like the old days.

Anton:      Just like the old days.

Participant:     Prior to ’74.

Anton:      Yeah. So that securitization is what really caused the boom and the relaxation in criteria. I don’t think as a country we’ll ever really let that happen again. I’m not saying we’re not going to have boom and bust cycles, because that has to naturally happen. I don’t think you’re going to see the large appreciations and the huge depreciations we’re seeing right now.

This goes right into Realty Track. Where is it? Right here. They released a report this morning saying there were foreclosure sales of 158,434 across the nation in the first quarter. What that means when you look at it is that foreclosure sales are slightly down and that based on the total number of foreclosures that have been foreclosed on and the number that’s being sold, Realty Track estimates that we have approximately a three-year supply.

Participant:     Wow.

Participant:     You’re talking about REO sales. You’re not talking about auctions.

Anton:      I’m talking about REO sales. Correct. The general public uses the word foreclosure, REO, bank owned, all synonymously. Bank owned, excuse me, foreclosure auction is what they term the general public for the actual auction that happens at the steps. So, if we’ve got almost three years of supply in foreclosures, why would the number of foreclosure sales go down in first quarter? What would be reasons, external stimulus?

Participant:     Banks pushing them off looking for the market correction.

Anton:      They’re pushing them off hoping for a market correction.

Participant:     They’re being sold.

Anton:      Excuse me?

Participant:     They’re being sold.

Anton:      Well, if they’re being sold, then the number in first quarter would have been higher than it was in fourth.

Participant:     Why? You’re killing me. Come on.

Anton:      Well, I want everyone to think about this. The robo-signing epidemic stopped at a lot of major institutions in November and December, and they halted their foreclosure process. They went back through to revisit that foreclosure process. So most likely what we’re seeing in first quarter was there were properties that did not get foreclosed on, because the foreclosure process was halted, so therefore, they did not come on the market. It’s the only thing that I can think of as to why it would go down, or it’s just an anomaly.

Participant:     In fact, we internally, we were talking on several different meetings, we thought that the inventory would spike dramatically with the inventory that’s sitting out there that hasn’t been put on the market yet in the first quarter of the year. In fact, that didn’t happen. But we know for a fact that the banks are sitting and the lending institutions are sitting on tons of inventory. So, why are they sitting on it? Why do you think?

Participant:     Waiting for the price.

Participant:     Government’s making them.

Participant:     I don’t think so.

Participant:     Kind of in a way. One theory might be . . .

Participant:     [inaudible 22:57]

Participant:     Hmm?

Participant:     [inaudible 23:00] for sure are being more scrutinized.

Participant:     Yeah.

Participant:     Possibly, but one thought that might be happening of course is that they’re worried about their ratios and their indebtedness ratios. If they’re reporting these as non-performing assets, what does that do to the bank?

Participant:     Right.

Participant:     It devalues it.

Participant:     It devalues the bank, right? So could it be that they’re artificially holding up, setting up foreclosures, because of their own financial situation?

Anton:      Because the second that they bring back an asset and then mark to market accounting rules kick in and then they have to then change the balance sheet. Mark to market accounting rules right now though are suspended. So even though they know it’s worth 200 and they’ve got it on the books for 350, they don’t have to write it down until they foreclose.

Participant:     So no foreclosure, no problem.

Anton:      So . . .

Participant:     They’re being more lax on their short sale process and more efficiently.

Anton:      I think what they’re doing is they’re trying to do more short sales. They’re trying to do more modifications. They’re kicking the can down the field. The foreclosures online in the state of Washington is basically supposed to be like 6 months, and right now we’re averaging 13. So that’s double of what it should be, and the only reason for that would be a lot of short sales and they just plain don’t want to foreclose. We have a short sale with Indy Mac Bank, and every time we turn an offer in, they’re just, “Oh yeah, thank you,” and then the foreclosure date goes away. Now, they don’t actually approve an offer at an acceptable price. That’s a whole different story, but they keep kicking the foreclosure date down the field. They’ve done it three times now. I’m on offer number four.

Participant:     As long as you’re in contract.

Participant:     But it’s interesting, the same report that Anton’s got up here, if you go into it. Nevada’s got 53% of all the state sales are in the foreclosed area. 53%, so if you’re a realtor, what do you think you sell?

Participant:     Foreclosed homes.

Participant:     You better be selling foreclosures, because otherwise, you’re not in business right?

Participant:     What’s our stat?

Participant:     I’m getting to it. So California and Arizona account for 45%.

Participant:     And so other states for foreclosed sales accounted for at least one third of all sales did not include Washington.

Participant:     Huh.

Participant:     Because we’re 18 months behind.

Participant:     Exactly.

Participant:     We were late to the party.

Anton:      And a lot of people stated experiencing the downturn in ’05 and ’06.

Participant:     What was the difference of the downturn in those bigger states though as far as median price?

Anton:      California, in some places, has come down as much as 55%. Florida, in some places . . .

Participant:     What are we?

B:    What about non-recourse?

Participant:     40%.

Anton:      40%, on the average now.

Participant:     Yeah. Because I think, again, that higher drop is why there was more so fast.

Participant:     But remember though, what we said a minute ago about we went to an over correction on the upside. Now we’ve gone to an over correction on the downside.

Participant:     Right.

Participant:     You know that in the 2001 to 2006 time frame, we didn’t raise 40%.

Participant:     Right.

Participant:     So that means we’re below 2001 pricing, right?

Participant:     And to see those other states, I think they rose substantially higher, right?

Participant:     Absolutely. I mean . . .

Participant:     Again they were . . . we thought we were over inflated. They were way over inflated.

Participant:     I mean, I’m a poster child. I own a house in Arizona, and I spent $300,000 for it. It’s worth $150,000 today.

Participant:     And Nevada’s even worse, because . . .

Participant:     Okay. So let’s, hold on. Let’s focus back. Houses that sell from this that make money. Houses, the stats, I want . . .

Anton:      I don’t think they understand the market, because people are moving in from out of town. They’re moving in from other places. They’re also thinking about maybe relocating to Arizona right now or Florida, where it’s cheap, where you can go buy a condo in Florida. I literally just went and looked on the MLS. You can go buy a condo in Florida for $28,000. It’s 1,100 square feet.

Participant:     I’ve had calls from people in Canada too looking to invest in rental properties and stuff.

Anton:      Yes, Mike

Mike: We had an artificial high.

Anton:      Yeah.

Mike: We have an artificial low. If you trend out normal appreciation at the subprime market never came into play, we are below that level.

Anton:      Yeah.

Mike: My question to everybody in this class is, if you’re an investor, is there ever a better time in history to buy?

Participant:     No.

Mike: Okay. Question number two. How many of you people in the room know people that are ultra conservative that are sitting on a large amount of cash right now and they’re unsure what to do with it? We may not have it ourselves. We may not have it ourselves, but the question is if we put our thoughts to it, and say who do we know that does have cash and if we are a master in stats and we can share with them to invest and buy rental properties, there’s
not a . . . talk to Joseph. You’re rents are going up. You’re demand is going up. They’re renting just like that.

Participant:     It’s a great way to diversify your future retirement.

Anton:      Yeah. There are three major things that are happening right now in relation to investment properties. What are they?

Mike’s already started to hit on them, but let’s just nail them all down so everyone knows how to have this conversation. Rental demand is increasing, because people are being kicked out of their properties due to a foreclosure, a short sale, or something like that and then they have to go rent. They were
paying $2,500 a month and they need to $1,500 or they need to pay $1,600 or $1,700. So rental demand is increasing. Multi-family is the only source of the commercial market that has shown growth according to the Swanepoel Trends Report.

Participant:     Oh wow.

Anton:      You have more.

Participant:     Yeah. The Reese report just indicated that vacancies have actually started to decline in the first quarter in large commercial properties that are inside the metropolitan areas. So what that’s saying is that vacancies are actually down 14.5%, if you’re sitting in Seattle. However, if you were sitting in Marysville and you were commercial, they’ve gone up 19.1%.

Participant:     Vacant.

Participant:     Vacancies. It’s interesting that the . . .

Participant:     But remember everything starts from those four areas.

Participant:     When we see that, then it usually goes there.

Participant:     Eventually it will . . .

Anton:      So you have increased rental demand. You have extremely low pricing right now, which is probably below the norm. For the first time in the last 15 years, Snohomish County is starting to cash flow from real estate. Real estate did not cash flow before then. So as an investor, you come in and you put 20% down. You have a cash flowing asset that you’ve bought at a 45 year low interest rate. How do you lose? People bet that in the stock market all day long and just based on the trend that they think it’s going to balance.

Participant:     So what is the interest rate on investments?

Anton:      Five and a quarter.

Participant:     Non-owner occupied.

Mike: Here’s the thing to understand. You have two schools here. If you’re an investor that owns ten or less financed properties, then you’re able to get secondary market loans. If that’s the case, then you’re usually about a half a point spread from whatever an owner-occupied interest rate is. They’re going to be looking usually 25% to 30% down.

If you’re over ten properties, then you’re going to be going to a commercial loan, and it’s kind of whatever you can negotiate with your different banks. Where this market is prime is especially for the people that don’t have over ten properties. You can get them secondary market loans and help coach them
through that process. I guarantee if you do a little bit of digging, you’re going to find a lot of people sitting on cash in the sidelines. I just put a transaction together a couple weeks ago with a gentleman that’s very, very conservative, and I just hit him right between the eyes. He became a partner in the transaction with me, and it was just a matter of saying, “You’ve talked about investments. Do you have your checkbook ready right now?”

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Participant:     Is that, that conservative attorney that I know?

Mike: Yes. It is.

Anton:      To add to this also, be thinking about the person who’s going to be the owner-occupied investor too. That’s an extremely good way to do something right now. FHA will allow the one to four unit. VA will allow the one to four unit, multi-family. Does USDA? I can’t remember.

Participant:     I don’t know.

Anton:      I don’t think USDA does, but FHA, so 3 1/2 % down, plus you could probably do that in conjunction with a house key or some
sort of down payment assistance, so literally owner occupied, zero down, someone else is helping to foot the bill.

Participant:     And only stay in it for a few years or have a rental history . . .

Anton:      Live in it for a few years and then . . .

Participant:     Couple years you’ll have a rental and you can go buy whatever you want.

Participant:     But, you know, Todd asked the question, “What’s important about all this to us?” I think that we skimmed too quickly over the idea though that people are looking to buy properties in Arizona, for example, or some other place that maybe is warmer. But an interesting statistic that we haven’t talked about is that in the last four years, the foreign investor used to only be 4% of the total market in residential home sales in the United States. It was only 4%. It’s doubled in four years. Now, you’d say, “Well, that’s only 8%.” 8% of everything sold as residential real estate today is a foreign investment. Now is that a market that might be important for you?

Participant:     Yeah.

Participant:     I got a quick question. You know what? There’s a bunch of Japanese people that are going to be moving to the Seattle area. What have we done, because they want to be out of Japan and they want to move to a different place?

Participant:     A smart realtor might want to take a look at that.

Participant:     That’s correct.

Participant:     Are you learning to speak Japanese?

Anton:      I think there’s a lot of opportunity, and I agree with Roy. We’re seeing more phone calls where it’s a 604 number coming in. That’s BC, and he says, hey . . . actually, this was a lead that Greg was working on. He said, “Hey, I’m Dr. Ran Rubinstein, a nasal doctor up here. Here’s my website. Here’s all my stuff. You can check me out. I’ll send you my proof of payments. Check out Galumbeck Plastic Surgery for more details. Is that property still available?” He didn’t know it needed $80,000 worth of work, but . . .

Participant:     It’s the duplex buyers [inaudible 33:42].

Participant:     But I mean, that’s a great point. So we got an eviction of the [inaudible 33:49] Arizona, and she’s selling one in ten is somebody from Canada, from BC. Pretty big thing.

Participant:     Yeah.

Anton:      The Canadian real estate market did not crash. It did this little bipp, and then it was like oh, just kidding and then it went right back up.

Participant:     Which was a lot like Alaska, by the way. Alaska didn’t have the same issues. So when you look at Alaska’s numbers, that’s the reason they’re different.

Anton:      Let’s bang through this part right here too. So Snohomish County statistics. Basically April of 2011 . . .

Participant:     You can barely read that.

Participant:     Want mine?

Participant:     No. I’ve got this one.

Anton:      We had 592 sales last month as compared to April of 2010, which were 749.

Participant:     Wow.

Anton:      We’re down 21% in the total number of transactions in April.

Participant:     Trick question though. What were you from 2009 to 2010, as far as increase or decrease?

Participant:     Increase.

Anton:      You guys do know these statistics.

Participant:     Because of the Obama $8,000 tax credit.

Anton:      The homebuyer credit.

Participant:     We were up 66.8% from 2009 to 2010 in April.

Participant:     Because that was the last or second to last.

Anton:      So in other words, we’re still up 40% over ’09. We’re still looking better. We’re just not as good as the artificially inflated market due to the buyer credit.

Participant:     So is it a good time to list your property if you’re Mr. Seller?

Participant:     Mm-hmm.

Participant:     Yes, it is.

Anton:      Average price when we compare April to April, down 14.7%. Year-to-date, down 11.6. Median price down 16.9, and the year-to-date, down 12.6. Why would the median be lower, or excuse me, experience more depreciation than the average, and what’s the difference between median and average?

Participant:     Say that, ask that first question one more time.

Anton:      How come the median experienced 16.9% depreciation, and the average only experienced 14.7?

Participant:     Because of the high end loans.

Anton:      High end loans depreciated more. Median is the middle. Average is all the properties divided by the total. So if the middle is moving, that means something on the up or the bottom is moving faster. Well, as we already talked about earlier, the $100,000 properties disappeared in days. So it’s most likely not the bottom, and we saw that only one property over a million, out of 82, sold in the last 30 days.

Participant:     I was just looking at a proxy for a CMA that’s out at Priest Point. It’s been on the market now for three years. $1.6 million started at, just sold for $722,000.

Participant:     Jeez.

Participant:     It’s not a short sale. It’s not a foreclosure.

Participant:     That little white [inaudible 36:49] right on the water?

Participant:     No.

Participant:     Wow.

Participant:     But the point is, that it’s proving what Anton was just saying, is that’s a huge drop.

Participant:     Dropped a million dollars in three years.

Anton:      So you’re representing a seller who’s got that home that’s priced above the median, because remember this is going to affect above the median more, so anything that’s over $263,000, excuse me, $232,000 you need to have a more stringent dialogue with them, especially as they start to get into those four, five, six and seven hundred thousand dollar prices ranges, because they’re going to experience more of the blood bath than the people who are below that median price.

Participant:     Kind of right between the eyes.

Anton:      I think it’s, “Hey Mr. and Mrs. Seller, your house has cancer. What do you want to do about it?”

Participant:     Yeah.

Participant:     Well, but there again though, there’s good news in this, right? We said that a minute ago what Todd was talking about with his people. If you’re going to move in this market, you’re going to take a beating on the house you’re selling. But guess what? You’re going to get a great value on what you’re buying. So don’t look at it as a negative. Look at it as a positive.

Anton:      And you could probably basically go into any of the price brackets, so they’re selling in the 200s, and then you can take them up into the 3s and you can show them how this property has depreciated less than this one and how it’s a much better time for them to purchase that up property and at any other points, specifically also the 45 year low interest rates.

Participant:     And they might not have been able to afford it when it was $450,000. It’s $300,000 today.

Anton:      Are interest rates going to stay under 5%?

Participant:     No.

Anton:      Why?

Participant:     Because it’s been artificially kept down.

Participant:     Inflationary pressure.

Anton:      Okay. Inflationary pressure. I really agree with that one. How do they artificially hold it down?

Participant:     I don’t know how they do that.

Participant:     The government’s been keeping it down.

Participant:     They didn’t raise the rates.

Participant:     Quantitative easing or something.

Anton:      Quantitative easing, to put it as simple as humanly possible, because it’s the most complex thing we could ever think of, we
took all those bad mortgages. They went to the Fed. Well, some people are still paying on their bad mortgages. So it’s kicking off cash. They take the cash and they go buy Treasury bonds from themselves. It’s money going around a circle forces interest rates down, but they only got permission to do it for the second time. So that ends in June I believe. So, as that ends and they’re not forcing hundreds of millions of dollars around in a circle to buy down T-bills, they’re naturally going to have to rise. However, what they’re going to try and do to stop things like that is they’ll keep the F fund rate low, and that’s the
rate at which a bank like Chase goes and borrows from the Fed. They’ll try and keep that low in order to help keep interest rates low, but they won’t be able to control it and keep it historically low much longer, because inflation will pop up. Didn’t we just see possibly maybe some hint of inflation, because gas is over $4.00? I know that’s tied to OPEC and stuff like that, so we don’t want to go down that. But when you see commodities start to spike in prices like that, when gold is at an unbelievable high, those are indicators that there is inflationary pressure on pricing.

Participant:     Well, I guess another question to ask though is, is this a good thing that rates are as low as they are?

Participant:     Yes. It still encourages purchasing.

Participant:     But, if you have money, where I used to get five and a half percent on my money market and now I mean so, all of that is cyclical.

Participant:     So let me ask you a different question.

Anton:      You’re on the right track though.

Participant:     So let me ask you a different question. What do you think will happen to the availability of money when the rates do go up?

Participant:     It won’t be as available.

Anton:      No. No. No. Toby, today I’m going to pay you a half of a percent to give me your money.

Toby: Mm-hmm.

Anton:      In 60 days, I’m going to pay you 5% to give me your money. How much more willing are you going to be to give me your money?

Toby: Now or then? Now I would be less willing.

Anton:      And then?

Toby: More willing.

Participant:     Supply of money’s going to go up.

Anton:      Supply of money, exactly.

Participant:     So see, everybody says the rates being down are a good thing for us. I would argue that that to a certain degree is true, but the problem with that is it also tightens up money when that happens, and what do we need as an industry in order to make things move? We need banks to lend, and banks are not going to lend until what happens?

Participant:     Interest rates go up.

Participant:     They can make more money.

Participant:     It also opens up the door for investments. You get paid more money, and people will leave their money in their investments instead of buying houses for investments.

Participant:     They’ll be making money off their investments.

Participant:     So it goes the other way.

Anton:      Sure.

Participant:     If you’re making money on your stocks or your investments or your different bank investments, people that are more conservative are going to say oh, this is a good thing.

Participant:     By nature, are Americans conservative with their money?

Participant:     No.

Participant:     Well, the beauty of it, if the interest rates start to go up, people are going to buy quicker. They’re going to be freaked out.

Participant:     They aren’t going to be spiking anyway. They’ll creep up.

Anton:      Hopefully. What are historic interest rates?

Participant:     Eight.

Anton:      Absolutely right. Now, if you take them since we started charting them in the early 1900s, interest rates have averaged eight. Then if you look at where we’re at in the early 2000s and even just a year and a half ago, we were really in the sixes.

Participant:     In ’97, I bought my house. It was six, seven, eight or something like that.

Participant:     Well, I remember in 1981, when we were buying our second house that I told my wife if we ever see 10% real estate interest rates again, that we would be fat, dumb and happy.

Participant:     Because you were paying 14 or something.

Participant:     Remember when the 80s were . . .

Participant:     Yeah.

Participant:     So, everything’s relative guys. Everything’s relative.

 

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