Foreclosure Filings in Thurston County

There is a good article in this morning’s Olympian about local foreclosures. The story highlights the rapid growth of foreclosures in our market over the past several years. Here is a link to the article.

http://www.theolympian.com/2010/02/25/1151116/foreclosures-spike-in-2009.html

The foreclosure filing numbers in 2009, while too high, are not as bad as the raw numbers reflect. Of the more than 1,400 Notice of Trustee Sales (or foreclosure filings), a couple a hundred were repeat filings. In other words, single property owners received multiple foreclosure filings.

The amount of these repeat filings was significantly higher in 2009 than in previous years. This shows that banks were both trying to: (1) work with borrowers to avoid foreclosure; and (2) avoid the loss recognition that happens after foreclosure. Therefore, the actual number of foreclosures was not nearly as high as the filings would suggest.

Still, the number of foreclosures is having an impact on the supply of homes available for sale. In Thurston County during January nearly one out of every four sales of existing homes was a bank owned property. One in three sales at $200,000 and under was bank owned. This excess supply in the market is having an impact on prices.

There is a lot of discussion about foreclosure properties’ impact on home prices around the country. Most of that discussion assumes that all home prices fall in lock-step with the fall in value on the foreclosed property. That is simply not the case. Foreclosures do impact market prices to the extent they inflate the supply of homes. This much is certain.

Click image to enlarge.

However, what is not discussed in the condition of foreclosed homes compared to non-foreclosed properties. Foreclosure homes are generally in rougher condition than their non-foreclosed counterparts. That condition reflects in the sales price of those homes. They quite rightly sell for less than better-conditioned non-foreclosure properties.

There is also much discussion about banks under pricing foreclosed properties and how that practice weighs on home prices overall. We cannot speak to the practices in other market areas, but we do not see much of that practice in our local market.

A review of bank-owned properties reveals similar market times to other well-priced homes in the area. This is an indication that the homes are priced to market. Were it otherwise, market times would be much lower and the homes would be receiving multiple offers. Again, the lower prices have more to do with condition than to the bank’s eagerness to sell.

Foreclosures are expected to remain well above normal levels throughout 2010. However, we are seeing a downward trend in the number of foreclosure filings. The chart below shows the downward trend line since last the first part of 2009. This is a trend we’re sure everyone wants to see continue.

Click image to enlarge.

Sales in the Lower Price Ranges Dominating the start of 2010 Home Sales

Guest Contributor: Scott Euteneier, Realtor

In our February 4th post, Strong Pending Home Sales to Start Year, we discussed the drop in price. The number in January was much lower than a year ago.

The number of home sales in the county was less last month than in December, but that drop was expected and was in-line with many expectations. January is simply a slow month for closed sales. (Pending sales, those contracts accepted but not yet closed, were very high during the month. See our February 4th post).

However, the high proportion of the bank properties caused the average sale price to come in at a number less than anticipated. In fact, January’s market statistics placed on explanation point on the concept of shopping for value!

First, as background, there are two types of sales that require the advance approval of a bank. The first is a “Short Sale” transaction. A sale is “short” when the net proceeds, sales price minus the seller’s closing costs, are less than what is owed on the mortgage. If the seller does not have the capacity to make up the difference the bank can agree to remove the lien, which is generally a Deed of Trust, on the property. This, in turn, allows the seller to transfer the property to the new owner.

The second type of transaction that requires bank approval is, of course, the properties that have been foreclosed – “bank owned” properties, which are commonly called “REO” (Real Estate Owned).

For this discussion let’s group both of these transactions as “bank properties”.

While bank properties currently make up only about 10% of the inventory of homes listed for sale in the county, they accounted for nearly 25% of the sales last month. And that trend looks like it will continue. We had an extremely high number of Pending Sales registered in January, and about one-quarter of those were also made up of bank properties.

These types of sales had an average sale price of just over $201,000, very much lower than the rest of the market in our county which came in at an average price of over $262,000 in January. The plethora of bank properties, and the low number of mid to upper properties (see our February 4th post), pushed the average home prices to a lower than expected number.

It is very important in this type of local real estate market to make sure that any decisions you are making are based on a complete analysis of the market as it relates to your specific property. The attention-grabbing headlines and other news analysis of the overall market make for good reading and offer a view of general trends. However, they ought not to play an important part in your final decision.

Helpful Moving Tip

If you are moving, here is a helpful hint that might make life a little easier:

Make a survival kit for the first night in your new home! Include items that will help you get through the night in case it is too late to unpack. Good items to include might be: non-perishable food, can opener, paper plates, plastic utensils, bottled water, a flashlight, a few towels, sheets and blankets, toiletries, pen and paper, maybe even a few small games to keep everyone entertained and don't forget a clean change of clothes for everyone!

Come back next week for more helpful tips.

Timberland Regional Library

Any time is a good time to visit our local Timberland Region Library. There are so many activities and great opportunities the library has to offer including computer classes, resume help, winter reading groups, gaming clubs for teens, story time and so much more!

Visit their website http://www.trlib.org/ for more information on what is going on in your area.

Market Shaping News in 2010

There are a number of projects to keep an eye on in 2010. This year, downtown Olympia will see real progress at the port property. Last year, work began in earnest on platting the acreage on East Bay. Infrastructure is being put in place to support a mixed use development on 13.3 acres.

Anchored by a new Hands On Children’s Museum, which will start construction mid-year, the plans for the port property include a hotel, shops, office space and residential condos. Other communities that have sited at Children’s Museum in downtown have watched a huge positive transformation take place.

Also, LOTT will be completing its new administration building on the adjacent property. This LEED certified building will also feature a cogeneration plant that will convert methane gas to power to heat and cool the building and the neighboring Hands On Museum. LOTT is also planning a fantastic interpretive center to showcase the process of making Class A reclaimed water. The combination of that facility and the Children’s Museum will be a huge draw for tourism, which will in turn be a huge shot in the arm for downtown Olympia.

At the south end of the County, keep an eye on Grand Mound. The tremendous success of the Great Wolf Lodge will propel the need for additional services in that area. The Planning Commission is already working on zoning changes to ensure smart land use decisions and growth in that region.

Congrats Providence St. Peter Hospital

Recipient of Magnet Designation

From our vantage point in real estate, we see through the eyes of our buyers the great many things that make this a fantastic place to call home. Our community’s assets have made Thurston County the third fastest growing county in the state. The quality of our area’s health care professionals and facilities is a huge driver in people’s decision to relocate to our area.

Our local health care professionals have long been recognized for their outstanding work. The latest in a long line of distinctions was just bestowed upon Providence St. Peter’s Hospital.

The American Nurses Credentialing Center designated St. Pete’s as a Magnet Facility on January 28, 2010. This honor places the hospital in the top four percent in the nation. St. Pete’s is one of just three hospitals across the state to achieve the designation.

The Magnet designation shows that St. Pete’s has created an environment that attracts and retains well-qualified nurses who deliver outstanding patient care in innovative ways to produce excellent patient outcomes. "The designation could not have occurred without every department in the hospital. This honor exemplifies our nurses' commitment to exceptional care, an interdisciplinary team, and our goal to recruit and retain the highest caliber of health care professionals." said Connie Huber, R.N., Vice President/Chief Nursing Officer.

Congratulations to everyone at St. Pete’s, especially the outstanding nursing staff. Keep up the great work. We are proud of what you do for our community. In our line of work, we see how respected your work is and what a difference it makes.

Opportunities for Owner-Occupied Buyers

It is no surprise to anyone that demand in all segments has been hampered in this economy. There is significantly less capacity in the credit markets, so the growing supply of properties on the market cannot be easily absorbed.

At the same time, this supply-demand picture presented some great opportunity for buyers to find properties at levels of affordability not seen in a long time. So with banks strapped for lending capacity, how was the typical buyer able to capitalize on this market?

The answer for many clients in 2009 came through a combination of the structure of the property for sale, and government guarantee loans.

One successful sales strategy for sellers of larger multi-tenant buildings has been to convert the building to commercial condos. Restructuring the building as condos has done a couple of things for these sellers. First, it provides an incremental exit strategy for those owners who don’t want or need to sell the entire building.

Second, it greatly expands the market of potential buyers. This area’s economy is centered on a lot of small businesses. Many of these business owners would like to own their own space but find a limited supply of buildings small enough to fit their needs.

At the same time many lenders in the region are challenged with too much real estate in their lending portfolios. As they look to reduce exposure in this area, they become selective in the types of real estate loans being made.

As a general proposition, lending on properties held for investment is less available than loans for owner-occupants. Lenders have more capacity to loan on owner-occupied space than property held for speculative investment because it is seen as less risky. So a building that has condos for sale will be able to pull in interest from these types of borrowers.

Owner-occupied lending can also be coupled with a government loan guarantee, which is the second factor helping move this area of the market.

We saw a great many loans processed for owner-occupied buyers using guarantees from the Small Business Administration (SBA) and Department of Agriculture (USDA). Area lenders work with these government agencies to help reduce the bank’s exposure while providing the source of money to allow commerce to keep churning.

We reported throughout last year that these programs have some nice features for small business owners, such as lower down payments and the ability to wrap in costs for renovations, machinery and equipment. In a time where businesses want to preserve cash reserves, those were huge selling points to our many clients who put the loan program to work.

If you or someone you know wants to explore wealth creation by owning a building, give us a call. We’d be happy to put you with some great lenders who can show you how attainable that goal might be.

Commercial Market News

As we start 2010, we reflect on the challenges and opportunities that exist in our marketplace. Under any type of market condition it is necessary to adapt to the current and impending challenges to find creative solutions. In so doing, buyers and sellers, landlords and tenants can find opportunity. During the past year, and throughout this year, we take great pride in helping our clients do just that.

The economic conditions at the beginning of last year were certainly reflected in the local commercial real estate market. After an abnormally high run-up in prices during the seller’s market from 2003-2006 market balance continued shifting back in 2009. Vacancy rates in most property types were up, while lease rates were down. This brought prices and yields back in line with historical levels of price gains.

During the seller’s market, the biggest driver of value – location - flattened in importance. During this market, location has become a big factor again. While no property was immune from the downturn, properties with the best locations faired far better than those in less desirable locations.

2009 continued to see tenants looking to shave occupancy costs. Rates in vacant spaces around the county offered tenants a chance to get into space at a rate manageable in this economy. And proactive property owners, looking to lock-in tenants to fill negative-cash-flow, empty space, were offering attractive rates. However, we advised owners to stay shorter on lease term, so as not be locked on below market rates when the market swings up again.

Even as the economy is starting to improve, after two quarters of positive GDP growth and stronger corporate earnings, we are still seeing the need to stay competitive on pricing. Until more of the inventory is absorbed, there remains a supply-demand imbalance that will keep a lid on appreciation for much of the year. However, we are starting to see renewed interest among tenants and buyers for well-priced properties as they recognize the opportunities that exist in today’s market.

President's Day

President’s Day is observed on Monday, February 15th, 2010.

In the 1880’s President’s Day was originally a federal holiday celebrating George Washington’s birthday. In 1968 a bill was passed which moved the observance of certain holidays to Monday. In 1971, after the bill went into effect, President’s Day became the commonly accepted name due to retailer’s using this to promote their holiday weekend sales.


If you are getting your house ready to sell or just spring cleaning, here is a helpful hint:

Disinfect the Disposal: To get rid of odors, drop in a cut-up lemon, some salt and a few ice cubes. The lemon deodorizes, and the ice and salt clean away residue

Come back next week for more helpful hints, fun facts and trivia questions.

Buyers Are Acting While Rates are Low

Mortgage Rates Dip Below 5% – But They are Expected to Rise

The average rate on a 30-year, fixed-rate mortgage was down to 4.97% according to Freddie Mac’s latest weekly market survey. The average fees & points were 0.7% on that loan type. Rates have been pretty steady so far in 2010, but this week’s results were the lowest of the year.

The stability of rates has been created in large part by the Federal Reserve. At the beginning of 2009, it embarked on a program to purchase $1.25 trillion of mortgage-backed securities (MBS). By making a market, the Fed was helping to keep rates low and stabilize the housing market.

Homebuyers have indeed enjoyed the lowest mortgage rates since Freddie Mac started tracking rates in 1971. However, the Fed’s MBS program is coming to an end next month. Without that support, market watchers believe that rates will gradually rise through the first quarter and balance of 2010. It remains to be seen how high rates will move once the stimulus is removed. Many expect rates to remain below 6%, however.

The expiration of the MBS program means that two big deadlines for homebuyers are approaching. The homebuyer tax credits expire on April 30, 2010. Both of these programs have had an impact on housing sales.

With the end of these stimulus programs in sight a lot of buyers are out shopping right now. Last month, pending home sales logged the third best January on record.

For more on mortgage markets visit: http://www.freddiemac.com/pmms/#Historical.

To view more on the Fed’s MBS program and how it impacts the mortgage market, watch the video below.

Tax Credits Expire Soon

Nearly 1.8 million people took advantage of the home buyer tax credit last year. Most of those received the full amount of the credit - $8,000.

The program was extended and expanded, so that it now covers both first-time buyers and many repeat buyers. First timer buyers can receive up to $8,000 and certain repeat buyers can receive up to $6,500.

To receive the credit, eligible buyers must be under contract on a home by April 30, 2010.

That date is not that far off. According to the latest Homebuyer survey by the National Association of Realtors, the typical home buyer spends 12 weeks searching for a home. There are a little more than 11 weeks till the expiration of the tax credit.

The looming deadline has urged more buyers to get out and shop earlier in the year. Last month was Thurston County’s third highest January on record for pending home sales.

In particular, the expansion of the tax credit to cover repeat buyers is helping more repeat buyers realize their dream of moving to next home. Up to $6,500 is available to buyers who have owned a home for 5 consecutive years out of the past eight years.

There is a little more breathing room with this current tax credit deadline. Unlike the previous tax credit, where a buyer had to close on the purchase by the deadline, now the buyer must only be under contract to purchase by April 30th. The buyer then has until June 30, 2010 to close on that purchase.

It is important to remember not to overlook price when putting the tax credit to work. Many homes are affordably priced now. More than one-third of all homes sold in 2009 did so without a price reduction. That means that two-thirds of the homes did require at least one price reduction before selling.

When that perfect home is found for the right price, the available tax credits and quite low fixed-rate mortgage rates make this a great time to buy and get into that dream home.

Strong Pending Home Sales to Start Year

Homes sales are off to a strong start this Year. There were 293 pending sales during January. That is the third best January on record. See Chart 1.

Click image to enlarge.

The strength in sales was not uniform across all price ranges. Like last year, much of the growth in sales was at the low end of the market. Median home prices were down to $227,500 from $244,900 a year ago.

That 7% dip in median price reflects both a drop in values market wide and a drop in sales in the mid to upper price ranges. Last January, for example, there were 21 home sales priced at $400,000 and higher. This year, there were only 10 sales in that price range. Fewer sales in the upper price ranges is somewhat skewing the pricing data.

Lower prices and the $8,000 first-time home buyer tax credit are keeping the lower-end of the market moving along. Sales below $200,000 were up an astonishing 47% in 2009. Expect sales in that range to continue to be robust. Sales overall were down 4% last year.

As prices in the mid to upper end of the market come back to levels that reflect today’s values, those sellers will see more sales activity. Trade-up buyers are out there, armed with a $6,500 tax credit for repeat buyers. They are simply waiting to find value.

Buyers are looking for value, and they are acting quickly when they see it. Well-priced homes in all price ranges are selling at a record pace. Homes that did not require a price reduction were selling in an average of just 32 days (See Chart 2). That is nearly two weeks faster than at the peak of the seller’s market in 2006.

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By the same token, overpriced homes were ignored by buyers. These homes sat on the market nearly six months longer. Remarkably, these homes sold in an average of just 29 days after the price was reduced to market value.

Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.

2009 Finishes on a Strong Note

Regular followers of our blog will know that sales really starting picking up throughout the second half of the year, such as the huge jump in sales in November. See our December 2009 post entitled “Thurston County Home Sales Record Biggest Jump of the Year.”

It was a tough start to 2009. Through the first half of the year, home sales fell 18% compared to the same period a year earlier. See Chart 1. The broader economic conditions, including a falling stock market and rising unemployment, rattled consumer confidence at that time.

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Throughout the year prices started to come back in line with our market’s historic levels of appreciation. With the price reductions, buyers have jumped back into the market. In the second half of the year, home sales were up 10% over 2008 levels. See Chart 2.

Click image to enlarge.

Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.