Interest rates for mortgages are now around the low 4% range for a 30-year fixed loan.
There’s a general rule of thumb for interest rates that goes like this: for every 1% change in interest rates, you gain or lose 10% buying power. So if you were pre-approved to buy a $500,000 house a few months ago when rates were around 4.5%, you might now be able to afford a $525,000 house (5% more buying power).
It’s also a good time to refinance into a lower rate, which could save you tens of thousands of dollars in the long term.
Talk to your mortgage consultant today, and if you don’t have one already, I’m happy to provide references to a few that I know and trust.
Stats for the Seattle real estate market for February 2019 are out, so here’s the market update condensed into some highlights.
- Pending sales are down about 14 percent compared to February 2018.
- Inventory in Seattle rose from January to 1.8 months (0-3 months of inventory is considered a seller’s market).
- Median prices increased compared to January but were still down compared to February 2018.
- Median sale prices in Seattle:
- residential – $730,000 (down 6% compared to Feb 2018)
- condo – $444,000 (down 14% compared to Feb 2018)
- combined – $690,000 (down 3% compared to Feb 2018)
- 47% of homes took a price cut before selling, with 20% selling above list price. Compare that to February 2018 when only 14% took price cuts before selling and 64% sold over the asking price!
- We are seeing more homes go under contract than new homes coming on the market.
- We are seeing more offer review dates.
- Homes that are priced well are getting multiple offers.
As we continue towards the spring market (the busiest time of year for buyers and sellers), I think we’ll see a lot of buyers taking advantage of low interest rates but they may be competing for homes due to the limited choices.
If you’d like to see market update graphs that are updated each month, check out the market update section of my website.
What am I looking at?
This is the view from a video camera during a recent sewer scope of a townhouse in Ballard. The camera went through over 100 feet of sewer line on the property before finally hitting the main sewer line out in the street. To our surprise, it was cavernous and brick-lined! Not a common sight. We suspect it was a large convergence in the intersection, under a manhole cover.
What is a sewer scope?
A sewer scope is an inspection that you have done by a professional before you buy a house. Basically, a wire is fed down the drain and into the sewer line of a house. The wire has a video camera on the end of it so you can see the condition of the sewer as you go down.
Why do I need a sewer scope?
This is part of you doing your due diligence in ensuring there are no major problems with the sewer line. The relatively low cost of the inspection is worth it, especially if big problems turn up. Even if there are no obvious signs of backups or leaks, it’s always a good idea to consider getting a sewer scope.
Here are some things the inspector will check for:
- structural damage like cracks and breaks
- root intrusions
- grease or other buildups
- dips in the pipe, which can cause pooling and backups
Some smaller problems can be solved by using a roto rooter. However, because sewer lines are buried and not easily accessible, bigger problems like replacing sewer lines can cost a lot of money, especially if the street has to be dug up.
Hopefully, no problems show up but it’s always a good idea to check!
Let me know if you have any questions or want to know more about sewer scopes.
Wire Fraud On the Rise
Wire fraud has been on the rise in the past few years. Since real estate is an industry where large amounts of money are involved, many scammers are increasingly devoting their efforts to target home purchases. According to the FBI, cyber-criminals stole or tried to steal about $19 million from real estate transactions in 2016. That number went up to almost $1 billion in 2017. That’s a huge jump for one year.
What Is Wire Fraud?
Wire fraud is when criminals steal money by having people wire, or send, money to a fraudulent account. How do they do this? They usually find ways to pose as an agent, escrow officer, or mortgage lender. They hack into email accounts and monitor email exchanges between parties to learn important details about the transaction. Then, at the perfect moment, the criminals jump in and send doctored emails to look exactly like they came from a trusted source. They give instructions for the money to be wired to a specific (fraudulent) account. Once the sender wires the money, there’s almost no way to trace it or get it back. The money is gone forever and the scammers get away.
Close to Home
We often see or hear these stories online but it recently happened close to home. A few weeks ago, some clients of an agent in our office lost their earnest money of $20,000 to fraudsters. Sometimes, people lose hundreds of thousands of dollars.
Our agent had had multiple conversations about only writing a check for the earnest money and not wiring it. However, 30 minutes after a real email from our agent, scammers sent an email from a fake address that was very similar to the agent’s. It had all the correct formatting and contained knowledge of the transaction. The email also contained “updated instructions” for wiring the earnest money, which the buyers followed.
It turned out the buyers’ email address had been hacked and the criminals had been watching the interactions, waiting for the perfect moment to slip in. Even if it only pays off one out of 100 times, there’s lots of money to be made and little risk of getting caught.
Ways to Stay Safe
- Don’t wire money! Write a check if you can. I know it seems like we’re going backwards here, but it truly is the safer option.
- If you have to wire money, ALWAYS verify instructions in person or over the phone with a person that you already know, through a phone number that you already know. Be especially wary of wire instructions sent via email
- Make sure you have strong passwords.
- Don’t share personal information in emails.
- Don’t click on suspicious links or emails.
Please don’t become a victim of these criminals! The best defense is strong communication with your agent and being educated. The form below is something every agent should give you at the beginning of your agency relationship! Let me know if you have any questions or comments.
What Is WA Realtor Hill Day?
WA Realtor Hill Day is a day once a year when Realtors from across the state come together at the state capitol to speak with legislators about issues that impact the real estate industry. This includes tax and liability laws, zoning, and most importantly, housing affordability.
Unlock The Door
The Washington Realtors, along with Habitat for Humanity, Home Sight, and other groups dedicated to building better communities, are leading a coalition called Unlock The Door. This campaign aims to tackle the housing affordability and homelessness crises in the State of Washington. Here is the mission statement from their website:
“There is a housing affordability crisis in Washington impacting buyers, sellers, and renters from Seattle to Spokane. Growing pressure and demand for housing leads to skyrocketing prices and low housing supply. Families in all income groups are struggling to find homeownership opportunities. This impacts every part of the housing and rental markets in Washington.
According to the University of Washington’s Center for Real Estate Research, first-time buyers in King, Snohomish, Pierce and Kittitas Counties face home prices that are nearly double what they can afford.
We need to work with our state and local elected officials to solve this growing crisis in our communities. That includes educating lawmakers about the real world impacts on all Washingtonians.”
I encourage you to visit their website to learn more. Here’s a great video from their home page.
Realtors Come Together
On Thursday, January 24, I went to our state capitol in Olympia. I left Seattle at 7AM with three other Windermere colleagues and we arrived two hours later in Olympia. Over 500 Washington Realtors turned out, making it was one of the largest turnouts of any Realtor Hill Day event, ever!
First, we gathered for a briefing of the day. Various speakers updated us on the current state of the Washington real estate market and laws affecting housing in our state.
Second, we split into groups by county, and then by district based on where we live. We were going to be speaking with legislators who represented our communities and us. After all, Realtors are constituents and community members.
Third, we went over some of the issues we would focus on when speaking with our legislators. Most importantly, these were reforming condominium liability laws and increasing urban density zoning. I’ve provided more in-depth explanations of these issues at the end of this post.
36th District of Washington
The 36th district covers parts of Northwest Seattle, including the neighborhoods of Magnolia, Queen Anne, Ballard, and Greenwood. There were eight of us Realtors from the 36th District, four of whom are current directors of the Seattle King County Realtors Association. To put that in perspective, there are only 15 directors in the whole association. Now that’s great representation!
Next, we headed to the capitol building to meet with our legislators, Representative Gael Tarleton, Representative Noel Frame, and Senator Reuven Carlyle.
It was my first time visiting the capitol during a legislative session, and it was quite an interesting experience! The legislators have completely packed schedules of back-to-back meetings all day with all kinds of groups. Firefighters, architects, concerned citizens, school groups, us Realtors, and so many more. Consequently, the buildings and grounds are swarming with people moving around and milling about, waiting for their meetings. We had about 15 minutes for each of our meetings, which obviously isn’t a lot of time. Luckily, our meetings were mostly on time.
The three legislators we spoke to were all on board with the proposed changes to the condominium liability laws. These laws currently discourage the building of new condominiums, which are an important part of affordable homeownership. However, zoning is a more contentious issue. This is mainly because many people like having their big lots, backyards, and separation from neighbors. As a result, they don’t want increased density.
Overall, we felt that the legislators supported our main goals. Therefore, we feel optimistic that there will be positive changes to laws which will ultimately lead to more affordable housing opportunities in Washington state. Coming together with colleagues from all over the state and speaking with our legislators was a great experience. Everyone I met was very gracious and supportive, and thanked me for coming. Spending a whole day to travel down to Olympia was very worthwhile and I’m looking forward to next year!
Please comment below if you have any questions or input.
Washington Realtors’ Legislative Priorities
Reforming Condominium Liability Laws in Washington State
As it stands right now, if a developer builds condominiums in Washington state, they have a 100% chance of being sued. Let me explain why.
Each condominium project has a homeowners association. The HOA is made up of volunteer board members who own units and live in the building. These board members have a fiduciary duty to protect the other condo owners in the project. If problems in the units arise, such as defects in workmanship, then the condo developer could be liable to fix those problems. However, what has been happening is that HOAs have been preemptively suing developers to protect themselves (the individual board members) from liability. Otherwise, the other individual unit owners could sue the individual HOA board members.
As a result, developers have two choices:
- They can build condos knowing that they will be sued. This increases the cost per unit by tens of thousands of dollars because the developers have to insure themselves.
- They can build apartments.
Not surprisingly, most developers choose the latter. In fact, only about 5 percent of all recent multi-family permits in Seattle were for condominiums. In Spokane, it was about 2 percent. This means that Washington has a serious lack of condominiums, and most of the new condos that have been built are not affordable.
So why is this so important? Well, condos have typically represented one of the first rungs up from renting on the ladder of homeownership. With this “starter home” rung missing, people are forced to either continue renting or make the huge jump to buying a much more expensive house, which many people can’t afford. If we have more condos, and more affordable condos, then inventory increases and prices moderate.
Increasing Urban Density Zoning
Zoning designates what kinds of buildings can be built, and where. In Seattle, about 75 percent of all land is zoned for single family homes. This means that only one house can be built per lot. In order to increase affordability, more housing of all kinds needs to be built. That includes multi-family buildings like townhouses and condos. This is difficult to do when so much of our usable land is zoned for and already taken up by single family homes on large lots.
The goal is to increase density, especially near job centers and mass transit. This can be achieved by rezoning certain parts of the city to accommodate building denser housing. The problem with increasing density is that people like their privacy. They don’t like the idea of lots being packed from end to end with housing, taking away yards and street parking. This is why rezoning is a much more divided issue.
What is a mortgage calculator?
If you’re house hunting, then you need to know what you can afford. The first step is getting pre-approved with a mortgage lender. A pre-approval is a basically what the lender says you can afford overall, but it doesn’t tell the whole story. You’ll still want to know what your monthly payments would be. Most people use a mortgage calculator to do this. If you’ve ever used the Internet, then you’ve probably been on Zillow and/or Redfin, and you’ve probably noticed the built-in mortgage calculators they provide. These allow you to automatically see what your payments might be for a specific property.
But wait, there’s more! Online mortgage calculators might be free and convenient, but many of them don’t have all the figures you need to get a good estimate of a monthly mortgage payment. At its most basic, a mortgage calculator only has the mortgage amount, which is the price of the house minus the down payment. The calculator often defaults to a 30-year loan with an interest rate pulled from elsewhere on the Internet. The resulting monthly payment you see only includes the principal and interest on the loan. This is very misleading because there are other costs that go into your monthly payments.
Property taxes are the biggest omission. In Seattle, the 2018 property tax rate was $9.56 per $1,000 of assessed value, which is roughly 1% per year. So if your property was assessed at $500,000 (assessed value is often much lower than actual market value), then you would pay $4,780 in taxes that year. That alone is an extra $398 a month!
Other costs can include:
- homeowners insurance
- homeowners association dues (mostly for condos and planned communities, but these can also be hundreds of dollars a month)
- general home maintenance and repairs
- private mortgage insurance (usually required if you put less than 20% down)
- closing costs
These can all add up to quite a bit more per month than just the sale price of the house.
How can I get a more accurate estimate?
Find a mortgage calculator that has more than just the basic calculations of mortgage amount and interest rate. If you can adjust the figures or enter your own, even better. Many websites that provide free mortgage calculators offer “advanced” versions, so look for buttons or links to those.
Conclusion (TLDR [too long, didn’t read])
Even if you’re pre-approved and know the overall price of a house you can afford, there are other costs that go into your monthly home payments. The best way to estimate your total monthly payments is to speak with your lender. If you don’t want to bother your lender about every single house you look at and you want to use a mortgage calculator on your own, make sure the calculator you use allows you to enter in your own figures. Are you comfortable with that monthly payment? If not, then you’ll have to work with your lender to reach one that you will be comfortable paying.