According to the National Association of Realtors, last month we experienced a 7.4% jump in home resales. This is in all categories of homes from single family homes to condos and townhomes and it is occurring at all price points too from low to high priced properties. Even more interesting, sales are up in every region of the country but highest out here in the west.

Unsold inventories are down more than 16% from where they were a year ago. With low mortgage rates, tax credits and well priced properties, it’s a great time to be a buyer.

 Be forewarned though, mortgage rates will most likely rise in 2010. Note that the Wall Street Journal reports that Federal Reserve chairman Ben Bernanke has refinanced out of an adjustable-rate loan on his Washington D.C. home and into a more secure 30 year fixed rate around 5 percent.

Don Davis Ph:360 652-9994 email: dond@htlnw.com

The Housing Market

Washington State has a Growth Management Act (GMA) that restricts the amount of new housing for any county depending of projected growth.  This is why we have never seen 600 or 800 home developments like in California or Las Vegas or Arizona.  The county will only issue permits to developers based on the projected growth in that area in a certain period.  This is why we were not overbuilt when the slowdown occurred.  Several years ago, in the height of the boom, developers did pay too much for land, but the demand existed at the time. 

 The cost of the land is the biggest variable in the price of a house.  If it costs $100 per square foot to build a house, it doesn’t matter where it is located.  A 2000 sq ft home would cost $200,000 to build regardless if that house is in Edmonds or Arlington.  The difference is the price of the lot that house sits on.  If the lot cost $150,000 then that house would be a $350,000 home if the lot cost $50,000 then it would be a $250,000 home for the same house.  This is also why a housing market would bottom out.  The cost to replace or build a new home can only go so low.  If existing homes sell for substantially less than it would cost to build a new one, no on would ever build another new home. One of the biggest reasons that few new homes are not being built right now is the fact that most of the banks the builders would get their financing from are under cease and desist orders from the FDIC.  If the builder can’t get funding to build, then nothing gets built.  Once the inventory of homes decreases and the prices once again appreciate, the banks will free up capital and the builders will get back to work.

What makes the Puget Sound region so unique is that we can really only go north, south and up (high-rises) to build new homes (east is mountains and west is water).  There is virtually no buildable land left in most of King, North Pierce and South Snohomish Counties.  Essentially if any new homes are going to be built the developers need to go to south Pierce or North Snohomish County.

 Unfortunately the news media doesn’t report any detail about our own housing market.  This seems really stupid to me.  We have local newspapers, TV and radio stations and they seem to cite the worst statistics available for the housing market.  They will report on national statistics and default rates.  I defy you to send me a detailed report from the news sources that cite our own local market statistics.  It is not newsworthy.  They aren’t going to be able to sensationalize this market because there is nothing to sensationalize.  While we have seen a modest decline in home prices from the unrealistic highs in late 2007, we have plugged along this year selling down the inventory from an almost nine months supply to almost a four month supply.  At this rate by this time next year we should be under two months supply with few new homes being constructed.  What does 2011 hold in store?  We just might be out of home to sell.  If you own a home you will be very happy, if you are trying to buy a home then you might be kicking yourself that you didn’t buy when the availability and the prices were within your reach.

 If you have ever though about buying a home, you might look hard at doing it soon.  Home prices are low and inventories are high, meaning you have a great selection to choose from.  Interest rates are currently at historic lows.  There is up to $8,000 tax credit.  When any of these things change it could cost you substantially more to buy a home.

Below is a TEN year history of home sales for Snohomish, King Pierce and Kitsap County collectively

While all the news medias would want you to believe that all is doom and gloom, we have outsold last year and are about average for the decade.

source: NWMLS

Lew Sichelman has a report on the LA Times today -

Reporting from Washington – The recent conviction of a Long Island woman who stole the home of a 93-year-old retired barber suffering from Alzheimer’s disease should serve as a warning to the friends and relatives of elderly people about the surprising ease with which some older homeowners can be exploited financially.

The elderly are victimized to the tune of $2.6 billion a year, according to a recent report from MetLife’s Mature Market Institute. And that’s a conservative guess because it has been estimated that only one in 25 cases of financial abuse is ever reported to authorities.

At a conference last month of specialists in reverse mortgages, a financial tool that seniors can use to tap into the equity they have in their homes without having to sell or move out, lenders were asked to help uncover ploys and schemes designed to fleece unsuspecting and often overly trusting seniors.

Click here for the full report.

One of the raging debates going on in Washington is about health care. I was listening to good ole Glen Beck on the radio the other day and an unidentified health insurance agent said, “illegal immigrants are able to get health insurance by using their identification number from their homeland!” Also during the radio show an unidentified bank home loan officer stated exactly the same thing.

Now, I believe anyone who comes to this country contributing to the economic wealth, safety, and are law-abiding should have a chance. Many immigrants do jobs we americans believe we are too “good” to do. Without their work ethic and determination we would not be able to enjoy certain things we enjoy.

What makes it wrong for them to get health care, home loans and build a life in this country? Are we so pompous to believe we do not need them? Would it benefit our country to set up a realistic screening system to allow workers to stay in our country or do we stand by and watch thousands die as they attempt to sneak into our country?

Also on the radio show Glen Beck stated they were the reason why the housing bubble burst, because they weren’t able to afford the loan. When the loan officer attempted to correct him and say the immigrants made their payments on time and even ahead of time most of the time, he kept cutting her off. He spouted, “YOU SEE TEA BAGGERS, THIS IS THE REASON THE HOUSING CRUNCH HAPPENED. BANKS GIVING LOANS TO IMMIGRANTS!” The poor caller tried and tried to correct him and he finally cut her off and went on his usual rant.

 It is proven we can not stop illegals from coming to the country right or wrong they are here.

What do we do now?

Imagine, if you will, standing at home plate.  It is the bottom of the 9th inning, and you’re at bat.  Three balls and two strikes.  Bases loaded.  Here’s the pitch……..STRIKE THREE!

That is the image I get when I read of what the House passed today in Washington.

In an attempt to place regulations in the entire finance industry, from Bill’s Bank and Trust, to World Bank of North American Chinese Commodities and Securities, the House passed the bill in a vote of 223-202. 

I suppose I should explain a little.  The legislation would govern the simplest payday loan and the most complicated high-finance trades. In its breadth, the measure seeks to impose restrictions on every house of finance, from two-teller neighborhood thrifts to huge interconnected conglomerates.

Democratic leaders had to fend off a last-minute attempt to kill a proposed consumer agency, a central element of the legislation and one the features pushed by President Barack Obama. The agency would strip consumer protection powers from current banking regulators, and big banks and the U.S. Chamber of Commerce vigorously opposed the idea.

Democrats said the legislation would help address the shortfalls that led to last year’s calamitous financial crisis. Republicans argued that the regulations would overreach and would institutionalize bailouts for the financial industry.

That was just a tidbit from the AP report.

Being in the finance industry, I feel compelled to speak of how ridiculous this would be.  Maybe the Senate will kill it in January, which is where it goes next.

This bill essentially gives the FED control over the financial sector of the United States.  So let us look.  Government Healthcare (in progress still), Federal Bailout (thank you taxpayer), and Government controlled Financial System???

There are many things that need to change, we would all agree, but some things make no sense, and judging by the already loud voices I’ve heard, this is not a change.  It’s a takeover. 

I stated that I think large entities should be permitted to fail, that’s capitalism.  However, letting the FED control them, well that could be another “ism” we won’t talk about today. 

Read the linked article and draw your own conclusions.  The market remained the same pretty much all day with stocks trending up, and bond prices tanking (raising) mortgage rates.  Aside from the legislation today, there was plenty of positive news to read about that you can find in my recent posts.