Sequim Washington is growing even in this national recession.  How is that possible?  Sequim is a very healthy little economy.  One of the reasons it is a healthy economy is because Sequim has been a retirement community for decades, and the retirees who move here tend to be conservative financially, and have not refinanced their homes to buy toys and get further in debt.  Retirees have payed off their homes or have lived humble lifestyles within their budgets.  This means we don’t have a lot of foreclosures, and there is a solid financial base for all the related service industries (groceries, medical, dental, automotive, restaurants, recreation, etc.).

Sequim Washington Big Box Stores

Sequim Washington Demographics

Perhaps the biggest proof that Sequim Washington has a strong economic base and a promising future comes from all the big box stores that have been moving in and building in Sequim.  You know that before big box stores ever consider buying prime real estate in any community, they do extensive demographic studies.  It is not the neighboring towns on the Olympic Peninsula that are attracting all these big box companies–it is Sequim.

The latest big box stores who love Sequim’s retired population and the future of Sequim Washington include Ross Dress for Less and the Grocery Outlet.  There is a good list of big box stores who love Sequim’s demographics, including Costco, Home Depot, Petco, Starbucks, WalMart, Office Depot, and a number of restaurant chains.

Sequim Washington Real Estate

Why is it important to retirees that the big box stores have been building in Sequim?  Because the demographic studies they perform independently are all saying the same thing–that Sequim is a strong community with a very solid demographic base of financially stable retirees.  These studies show a stable real estate market, even though prices have been discounted in this market.  It is primarily the strength of the future economy and future real estate market that these demographic studies have examined, and the indicators are all good.

This is one of the reasons I have said that buying a home in Sequim Washington is a good move and a good investment.  While most of us would concur that the real estate market may not begin to recover for a couple of years or more, when it does, Sequim will be one of the strongest economies in the country.  That doesn’t mean houses will appreciate rapidly, because they won’t.  The appreciation will be slow, perhaps 3% a year, but of all regional real estate markets, Sequim Washington has a market with a great economic base and solid indicators for future growth.

Of course, another huge factor (which I’m sure is part of the big box studies) is that retirees continue to move to Sequim and buy homes, and have been doing so every single month during the entire recession, and that has picked up dramatically recently.  Sequim Washington is a strong economy and a stable real estate market, which is good news for retirees.

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This is the third in a series of Buyer Tips in a Buyer’s Market.  Sellers are making some big mistakes in this market, and a buyer who is fully informed and knows how to intelligently negotiate will have a huge advantage in this market.  In part 2 of this series of Buyer Tips, I wrote, “Some listing agents are making huge mistakes in negotiating the price and terms for their selling clients, and sometimes these mistakes rise to the level of sabotaging their own clients’ transactions.”  If you’re going to negotiate the best possible price and terms on the purchase of your retirement home in Sequim or Port Angeles, it will be tremendously helpful if you know what sellers and their agents are doing and not doing in the negotiating process.  As they say, knowledge is power.  The purpose of this series on Buyer Tips is to give you power when you are negotiating.

Buyer Tips from Seller Mistakes

True story.  Clients hire a buyer’s agent and make an offer on a manufactured home on a couple of acres.  The listing price is a little high, probably $35,000 above fair market value in this market, and that’s being generous to the seller.  The house was listed at a price just south of $300,000 and the buyers offer was very reasonable.  The earnest money check was written for $1,500.  There were several standard addendums, including a home inspection addendum, a well and septic inspections, and a financing addendum.

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We are in a buyer’s market with the real estate market collapse.  While that might be obvious, it is much more of a buyer’s market than many realize.  This is what I would call a Super Buyer’s Market.  But it’s not a buyer’s market for any buyer.  Mortgage financing has gotten much more difficult to obtain for new home buyers or buyers with low or even average credit scores.  However, for the buyer with a high credit score and high income and low debt, or even better, buyers with cash, this is a super buyer’s market.

Buyer’s Market in Real Estate Collapse

Buyer’s Market Offers Opportunities

Buyer’s have a unique opportunity right now in Sequim and Port Angeles.  If they are pre-qualified or buying with cash or a very large down payment and good credit and income, they can buy a home below the current fair market value, which is already below the highs of 2005 and 2006.  And if you want to know where some of the best buys are right now, I’ll tell you they are in the higher priced homes.  Homes priced above $600,000 are typically $100,000 to $300,000 below their highs.

Buyer’s Market – Timing is Everything

It may be a buyer’s market, but timing is everything.  It always is.  A buyer looking for a quality home with a great water view, for example, may be in a buyer’s market, but that doesn’t mean they have all the time in the world to buy.  There aren’t very nice listings with great water views, and the best ones are being purchased buy buyers at a rate of about one a month.  Once that nice home is gone, it’s gone for a long time.  This tells me a buyer can’t fool around once they find the ideal home, but it also tells the buyer they can negotiate a very reasonable price.

There is a huge trap for sellers in this market, and I see a seller make a mistake and chase a buyer away about once a month.  When a seller has a buyer who is serious and wants to write an offer, that seller should not start laying down conditions as though this was still a seller’s market.  It’s not, but I have seen several sellers start laying down conditions about closing dates or other details, and buyers in this market simply walk away.

There is one appropriate answer for a seller who has a serious buyer, and here it is:  “How soon would you like to close and how can we accommodate your inspections between now and closing?”  Any other response could literally kill the transaction, and in this market a seller might not see a buyer again for one or two years.

Sellers don’t have to be discouraged, because there still are qualified buyers for nice homes in nice areas that are listed at reasonable prices.  Just be sure that when that one buyer in a hundred comes along that you don’t say or do the wrong thing and chase that buyer away.  I’ve spent a lifetime learning the nuances of not chasing clients away, and putting transactions together so that everyone wins.  This is what I do, and I love doing it.

This is a buyer’s market like none other.

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Click on Image to Enlarge

In the early 1960′s a loaf of bread was 35 cents, a dozen eggs 50 cents, a gallon of milk 75 cents, and a postage stamp was only 5 cents.   A 30 year fixed rate mortgage was in the 5% range.   Today that same mortgage interest rate is 4.78%, the lowest it has been in 50 years.

No wonder there is a spurt of buyer activity in California,   Nevada, and from Bellingham to Port Angeles.   It has become apparent to even the average person that now is the time to pull the trigger and buy a house or have one built.

There’s a unique convergence of circumstances right now that makes this an extraordinary buyer’s market.

First, interest are the lowest they’ve been in 50 years.   Does anyone think for a second that interest rates are going any lower?   No, but they will go back up.

Second, real estate prices are dragging rock bottom and have been for a while.   Many homes have been selling for less than the mortgage balance. It is just not likely there is much room, if any, for real estate prices to go lower, especially with buyers stepping back into the market so suddenly.

Third, the inventory of homes for sale is the best it has been in my three decades in the business, although I do think buyers are cherry picking the best homes on the market.

In a market where you had one or two of these circumstances, you would have a buyer’s market.   Now we have all three, which I call an extraordinary buyer’s market.   Soon this opportunity will be gone. There is no doubt about this.

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Sequim Realtors have differing opinions about the timing here:   is now the time to buy a home or should a person wait for a while?   Someone once posted a comment that Realtors always say it’s time to buy.   Well, there’s some truth to that, but it’s not true. I’m more interested in an honest and realistic assessment of the market than trying to promote the idea that people should buy real estate through me now so I can make a commission.   Reputation and referrals are far more important than a quick commission, at least they are to me as one of the Sequim Realtors.

Sequim Realtors Talk

I recently wrote an article entitled, When Will The Market Come Back.   As of today, there were 22 comments, and you’re welcome to read them.   Joetta commented:

I just finished perusing Rich Dad’s Who Took My Money.  He made the point (repeatedly) that when the market is bad is the time to jump in.  I think that’s the message we should get across, and help our clients be smart about it.

My response:

Joetta, point well taken.   I agree with you, but let me refine our reasoning a bit.   We need to be smart about how we go about advising clients to get in there and buy.   We need to be honest about the market conditions.   It is not true that it is always a good time to buy, and it is not always true that when the market is bad it is time to jump in.   Robert Kiyosaki would agree in Rich Dad, because buying in a bad market means buying when it makes sense, not just throwing money at any bad market.   Our clients expect us to be intelligent and wise, and they rely upon our counsel, so they should buy when the market is bad, but timing is everything.   When should they buy?   How or what should they buy? If you had told a client 8 months ago to buy, because they should jump in when the market is bad, your advice would have been poor advice.   Since then, depending upon the location, they might have lost as much as 30% in the investment you recommended.   We may or may not be at a bottom, but we can’t say for sure this is the right time to buy.

What we can say, and I think you will totally agree with me, is that a particular house may be a really great value right now, and with interest rates at historical lows, and with this being a buyer’s market, a particular house may actually be a fantastic buy right now, especially because we have houses that are $100,000 below where they were a year ago, and it may be listed as a short sale.   Even if the market goes down somewhat further, this kind of transaction could be a great deal, if negotiated professionally.   I do think clients are intelligent and want to hear the whole story, and listen to our reasoned opinions about the market and timing.   What they don’t respect is Realtors constantly saying, “Now is the time to buy!   Now is the time to buy!”   Many of them have seen how that advice turned out this past year.   Good clients will buy when the timing seems right and the investment looks good.   It’s our job to help advise them as best we can.

More from Sequim Realtors

And another comment to that post:

Great writing and quite informative. As an investor and agent, I have always believed that the only real money is made when one buys the property. If one has appreciation, great – that is a bonus as far as I am concerned. I buy and so do my active investors properties that cashflow. I always am concerned about buying a great location and with obtaining the best financing. I am happy to report that I am selling a property that I bought about 6 years ago for about $500,000 profits (before Uncle Sam). It was positive by over $2000 per month all but the last 6 months when it was in contract. The mortgage was paid down by over $100,000 (by the tenant).

There are now almost too many opportunities to evaluate! I can’t wait. I am working with “flippers” who are making more money than ever in this “terrible” market   – and with less risk. Yes, one door closes and another opens. Open the door!

And this one:

Chuck … I was at Sequim and Port Angeles years ago for a beautiful week and pleasant time, now days gone by. I agree that  the wise man will prepare for the long winter, be careful with resources, adjust something about the products  he sells, use new methods, reach new customers, be careful about costs, surround himself with wise people, develop a strong network of friends and business associates, people to help each other,   not waste time on old concepts, prepare for other such times, be stretched and challenged, be humble and seek to learn. The wise man will also  put the needs of his clients and customers first.

I think that last sentence says it all:   The wise man will also put the needs of his clients and customers first.

Update on what Sequim Realtors say at Sequim Real Estate Market Prediction.

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The real estate market has taken a serious beating these past months, and the U.S. economy appears to be chaotic at best. I’ve been watching real estate cycles for 30 years, and I’ve learned four important lessons in this market.

Lesson Number 1. The national real estate market has very little to do with a buyer’s opportunity to find the ideal home at a great price right now. Let me explain.

Real estate news is a macro-economic perspective, while buying a home is a micro-economic decision. National news about housing inventory, foreclosures, and prices is all very interesting in the media and in the college classroom, but when John and Mary Smith are considering buying a home or building their retirement home in a new area, the national stats are irrelevant. Their decision is based on their personal goals, their credit score, their available funds, whether or not they must sell a house first, what kind of loan they can get, and a host of personal issues.

If all signals are full speed ahead for John and Mary Smith, they are in the most powerful place and time that buyers have found themselves in decades. They can shop at their leisure, taking time to gather information on the Internet before they actually hire an exclusive buyer’s agent, and they can narrow their search as they walk through a dozen or so homes.

Since the Smiths are the master of their own offer, they are in full control of the price and the terms of the offer. If they cannot come to terms with a seller (who may have had his house on the market for 256 days or more), they simply say, “Thank you very much. It’s been great. We will be making an offer on another house.”

I have written elsewhere that it is important to make a distinction between the market and an individual house. That’s exactly what the Smiths will do. The state of the market plays out in their favor right now, but their decisions are based on the facts in their little world and the house they decide to buy.

As I sipped a cup of hot gourmet coffee while walking around my yard this morning, I considered the state of the world economy, the U.S. real estate market, foreclosures and other disconcerting statistics, including my last five real estate commissions that went “poof.” Then I noticed a bee perched on a leaf and scratching himself. (I’m guessing the bee is a “he” and it appeared he was scratching his head, but there are many things in life I do not actually know. I’m only 54.) The bee was clearly unconcerned with the state of the economy or the number of days it takes to sell a home. The bee lives in his own micro-world, and I’m thinking macro-economics is not something at the forefront of his mind lately.

Buyers can and ought to focus on their own world and their own real estate market in deciding whether now is the time to buy their next home. We’ve never been in a buyer’s market like this where buyer’s who have good credit or cash have so much power.

Lesson Number 2. Don’t trust strangers with your money. If investors in the stock market, which includes the majority of retirees with 401(k)’s, have learned anything in this recent crash, it is that you should not blindly trust financial advisers or fund managers. I learned many years ago that “they don’t know what you think they know.”

Lesson Number 3. A good investment in your home and in rental real estate, where you are not over leveraged and where you seek to be totally debt free (a novel concept today, but quite popular among our grandparents’ generation) is far more secure and safer than the roller coaster known as the stock market. Of course, you must buy right and hold for the long term, and practicing that effectively would mean that dips in the real estate market, even of the current magnitude, would not jeopardize your retirement plans.   [Read a series on Real Estate vs. the Stock Market.]

Lesson Number 4. Find a professional in real estate who is truly knowledgeable and experienced to help you make your buying and selling decisions, and stick with that professional for life. I do not recommend that you retain any Tom, Dick, or Jane who got a real estate license as a part-time hobby. That would be like letting a stranger on Wall Street manage your 401(k), and look how that turned out.

Chuck Marunde, J.D. is a retired real estate attorney, author, and exclusive buyer’s agent in the State of Washington.

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