The Sequim real estate market is doing fine, despite national reports that the real estate market is down.  Northwest Multiple Listing Service (NWMLS) members reported strong gains in home sales during February, with brokers pointing to several encouraging signs for a busy spring season. Improving consumer confidence and a looming deadline for homebuyer tax credits are helping to boost activity, according to NWMLS officials.

Pending sales (offers made and accepted, but not yet closed) jumped nearly 45 percent last month compared to a year ago, marking the 11th straight month of month-over-month increases. Twelve of the 21 counties in the MLS market area reported double-digit gains in pending sales, led by San Juan County (up 85.7 percent), Snohomish County (up nearly 71 percent) and King County (up nearly 63 percent).

Closed sales also outperformed year-ago totals, rising 33.5 percent. Members tallied 3,214 completed transactions last month, up from the 2,407 closed sales for February 2009.

Prices, while showing signs of stabilizing, still lagged year-ago figures. Area-wide, the median price for last month’s closed sales of single family homes and condominiums (combined) was $260,000, down about 6.5 percent from a year ago. The median price for single family homes (excluding condos) dipped 4.6 percent, while condo prices declined nearly 9 percent.

In the four-county Puget Sound region, the median price for single family homes that sold and closed last month was $297,000, down about 2.6 percent from the year-ago figure of $305,000. Condo prices in the area fell 7.7 percent, from the year-ago selling price of $253,000 to $233,500 for last month’s sales.

Move-up buyers are accounting for some of the surge in activity. Brokers credit the combination of a $6,500 tax incentive for qualified repeat buyers and thawing jumbo loan market as factors in spurring activity for this segment.

Earlier in the week, the state Employment Security Department reported the state’s economy “picked up some steam in January,” adding an estimated 12,400 jobs – the first monthly gain since November 2008.

Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents. The organization, based in Kirkland, currently serves 21 counties in western and central Washington. Ferry and Clallam counties are now included in the monthly statistical reports.

The Sequim real estate market ha s long been more stable than our national real estate market and many weak areas of the country.  Port Angeles, which is only 15 miles from Sequim, is also a stable residential real estate market.

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One of the challenges of living in one part of the country for many years and then shopping for a home in a new area where you intend to retire is that markets tend to be so different around the country.  I’m in Las Vegas as I write this visiting my son, and it’s a great opportunity to look at houses.   How different the Sequim and Port Angeles real estate market is from the Las Vegas market.

Las Vegas has a much bigger market and inventory, and there is a large inventory of foreclosures, too, that dwarfs the Sequim market.  The architecture is dramatically different, and neighborhoods are different.  And the state of the real estate market has driven the prices of homes in Vegas way down.  A home can be purchased in Vegas for $150,000, and a very small home can be purchased for around $100,000.  A beautiful custom home with 4,000 square feet, two levels, four bedrooms, and bathrooms in each bedroom can be purchased for around $500,000.  This same home would have been closer to $800,000 a few years ago.

The Sequim market has been much more stable, and nice homes are not cheap.  You can find a beautiful home in the $275,000 to $450,000 price range.  Incredibly beautiful.   Lots are priced very low at this time, too.

It seems to me that when coming to Sequim or Port Angeles to look at homes, you have to shift your thinking from the style of homes and neighborhoods and prices where you live now to the local market.  Our Sequim market is unique and most likely quite different than the market where you live now.  As I jog through Vegas neighborhoods this weekend, I can see how dramatically different the market is here.

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The real estate market is up, no it’s down, wait . . . well, it depends on what day you read the news and which news you’re reading.  Two days ago I wrote this in an article:

The Wall Street Journal reported that, “California’s inventory of unsold, previously owned homes shrank to a five-year low in December, in a sign that the state may be coming out of its worst housing slump in decades.  The supply of unsold single-family homes dropped to 3.8 months from 5.6 months a year ago and 16.6 months in January 2008 . . . In Northern California’s Santa Clara County, where inventory has dropped to 50 days from 243 a year ago  Amanda Garcia said she and her father Luis Garcia finally gave up a nine-month search for a home last month, after they kept losing out on homes priced in the highly competitive sub-$500,000 market.  ‘It’s more like an auction nowadays,’ said Ms. Garcia.”  [California Housing Shows Revival Sign, Wall Street Journal, January 23, 2010]

And this morning in Market Watch’s Economic Report, we have this title, Existing Home Sales Plummet 16.7% in December.  “The 16.7% percentage decline from November to December was the largest on record, dating back to 1968, the National Association of Realtors reported.”  But the same article then states that, “Sales in December were up 15% compared with December 2008.”

Watching statistics as they are reported and interpreted by the news media can be depressing and often misleading.  Retirees who are moving to Sequim and Port Angeles and buying or building their retirement homes are focused largely on what is best for them financially and consistent with their long-term goals.  They are intelligent and discerning, and their decisions are certainly within the context of a larger economic picture (their retirement fund, their savings, expected future income, etc.), but they are governed by their own wisdom about buying in Sequim and Port Angeles and not tossed about by every wind and rumor.  And that is a good thing.

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What will happen in the real estate market in 2010?  Not too many are stepping out to predict with any specificity what the real estate market will do in 2010.  There are some so-called predictions, but they are about as predictive as a fortune cookie.  Did you ever notice that the fortune in the cookie could be applied to anyone on the face of the earth in any century?  That’s why the fortune cookie business is so stable.  The cookies can be made in any century and they’re still good.

U.S. News and World Report writer Luke Mullins baked this kind of generic fortune cookie recently in an article entitled, 10 Things to Know About Real Estate in 2010.  In all fairness to Luke Mullins, it is a well written article, and I assume he would argue he wasn’t trying to be a prophet.  Here are the 10 no-brainers he offered for the real estate market in 2010.

1. Prices will bottom out.
2. Mortgage delinquencies will be up.
3. Foreclosures will increase.
4. Mortgage rates will rise.
5. The buyer’s market will continue.
6. Obama’s loan modification plan could be modified.
7. FHA lending standards may increase.
8. The buyer tax credit remains.
9. Markets will vary by region.
10. Mobile apps will help people.

Is anyone else short of breath with these stunning revelations?  Me neither.  Forgive me for my attempt at humorous sarcasm, but these are hardly predictions about the real estate market in 2010.  These are 10 of the most obvious no-brainers I’ve read in a long time.  I suppose I could have written about this coming year with something like this, “Some people will die.  Some people will live.  Some people will become ill.  The world will continue to rotate on its axis.  Hearst News will struggle with the loss of advertising revenue.”  Okay, tell us something we don’t know.

Now that I’ve had some fun at Luke Mullins’ expense, I will boldly go where some men have already gone, and make my predictions for the real estate market in 2010.  My speculation about the future of real estate is nothing but my own opinion, and subject to being right, partially right, partially wrong, or totally wrong.  But here it is.

Predictions for the Real Estate Market in 2010

The real estate market will become more segmented in 2010.  The real estate market for buyers of single family homes will no longer be one big market, like a smorgasbord with a huge inventory where buyers can pick and choose any color, shape, or size home.  Instead, we will see the beginning of a changing real estate landscape that is segmented into different smaller markets, and buyers will focus on the market they want and ignore the rest.  The market segments will include homes currently in default (possible short sales), homes already foreclosed on, homes for sale not in distress (listed with agents and FSBOs), new construction, and buyers will be making a distinction between older homes and newer homes that are more energy efficient, greener, and less likely to have health issues (excessive moisture, mold) and less likely to be a fire hazard.  Buyers are beginning to shop more and more within their segment, and that trend will continue through 2010.

Buyers will become far more astute in searching for and finding their homes.  The days of consumers relying totally upon their real estate agent for everything are over.  Buyers are now using the Internet to search for their ideal home and to do their due diligence on real estate agents.  Buyers are taking control of the process like never before, and the Internet is empowering them.  This will become more obvious throughout 2010 and beyond.

Interest rates will begin an assent most notably in March of 2010.  This is a guess, but not without substance.  Don’t look to Bernanke or the Feds to delicately manipulate monetary and fiscal policy to peg interest rates artificially low for the year.  There are too many market forces that will push interest rates up, and it is unlikely we will see them at these historical low points again.  This should not be taken to mean that interest rates won’t increase between now and March, because they will.  But the bigger move will begin in March.

The real estate brokerage business will see the most dramatic changes in its history.  There is a dramatic paradigm shift occurring in the real estate brokerage business, which is unfolding behind the scenes.  It won’t be so visible to the public in 2010, but watch for major changes in large brokerages, marketing, and how buyers and sellers work with agents.  Hint:  we are moving away from large brick and mortar brokerages to virtual brokerages that better serve buyers and sellers, and reduce the excessive overhead of traditional brokerages.  Territorial boundaries for brokers will begin to crumble.  The Internet knows no boundaries.

Home sellers will have to re-educate themselves on how to sell a home.  What used to work to sell a home, (i.e. running an ad in the Sunday newspaper and maybe in a real estate magazine, and placing it in the multiple listing service with an agent) will no longer be the key to selling real estate.  Home owners will have to educate themselves, because the real estate industry itself is entrenched in traditional brokerage and traditional advertising.  Home owners will have to become more engaged in the process, and that will involve research and education on their part, including doing their due diligence on what kind of brokerage and agent they will work with.

Home prices will begin a slow assent in June of 2010.  The return to a strong healthy real estate market is going to be a long slow journey, but the assent will begin this summer.  It will not be a steady upward appreciation as we have had in many cycles before.  Instead we will see appreciation that is almost imperceptible at the time, and there will be months at a time when prices stall before again beginning their assent.  In the weaker real estate markets around the country, prices will continue to slide.  Detroit and other local markets that are devastated by corporate shut downs or layoffs will suffer in their unique markets for years.  Markets like we have on the Olympic Peninsula, Sequim and Port Angeles, are more stable markets and will return to health slowly with less instability.  Gradual appreciation will start in June of 2010 and subject to periods of stagnation that last a few months at a time, home prices will gradually appreciate, especially in Sequim.

Home prices will stall for six months beginning in October of 2010.  The U.S. economy will suffer from growth pains as it works through very complex economic gyrations, and that will cause some uncertainty in the real estate market that will translate into several plateaus where prices will stall out for a time before increasing.  We’ll see this in the fall of 2010 until early spring of 2011.

Large home builders will struggle to survive, but small custom home builders who were financially strong enough to get through the recession will be building with more volume starting in July of 2010.  The big builders in major metropolitan areas who built thousands of houses on pure speculation will not see the quick return of their profitable business model in 2010, and maybe not in 2011 or 2012 either.  But small to medium sized home builders who can build a home under contract will see some hope as clients start to sign contracts in July of 2010, not in big numbers, but enough to sustain a small business.  There will still be a large inventory of homes in distress and foreclosed, but that market segment will not interest retirees who want to build their own dream home on a lot with a view of their choice.

High unemployment and corporate bankruptcies will continue throughout 2010.  There will be no smooth sailing in 2010, because the return of a strong economy will still be threatened by corporate bankruptcies and high unemployment around the country.  The strength of our small and large businesses will depend greatly upon many exogenous variables, which could change the game plan for all of us.  For example, if foreign investors  (i.e. Chinese) stop purchasing U.S. Treasuries, the U.S. Government could default on its debt, which would have extraordinary implications for all of us.  Also we have never had to rebuild an entire economy under the burden of so much growing national debt.  This will be a very unpredictable year for professional economists as long as our government continues with its radical socialist agenda.

Wall Street will have several false starts in 2010.  The stock market will have more false starts in 2010 than in any previous year most of us can remember.  There’s nothing more that Wall Street wants, that investors want, and that the news media wants than to be able to proclaim that the market has returned.  But there are too many cracks in the foundation.  The self-fulfilling prophesy of hope will cause the markets to climb enthusiastically several times in 2010, only to fall back and disappoint.  This negates the return of a strong real estate market.

Gold, commodities, options, and the futures market will be hyper-speculative and 95% of investors will transfer their money to the other 5%.  There will be wild speculation and greed in the riskiest of investments in 2010 as the market sends false signals.   This kind of uncertainty causes buyers to go into holding patterns, and that will be true for home buyers, especially retirees.  Uncertainty and lack of confidence tends to continue the problem.

As bleak as these predictions are for 2010, real estate (single family homes) will be the most stable investment for the year.  The national economy, Wall Street, and speculative instruments all are connected with the real estate market in various direct and indirect ways.  The stability and strength of the mortgage market, the banking industry, the money supply, interest rates, federal debt, all of these will effect (hinder) the real estate market in 2010.  But the real estate market, particularly single family homes, will show more stability and appreciation than any other sector of our economy.  One of the main reasons for this will be that investors and retirees will feel their money is safer in their own home than anywhere else.  That will be true in 2010 and beyond.

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The Sequim real estate market and the Port Angeles real estate market are up.   Whether this is a short term bump or a long term bump is anyone’s guess, but there is no question that buyers have stepped up to the plate.   Homes that have gone under contract (pending) has been increasing in the last month dramatically, at least for our small market.   A couple of months ago we had 81 transactions pending, then I wrote a couple of weeks ago how that had jumped to 100 and today it is 107.

The Sequim area is intimately connected with the California market and other markets outside Washington state.   When we see an increase in the real estate market elsewhere, after a short lag we begin to see it here.

On a national level we have seen a positive movement recently.   After three years of declines, home prices increased 2.9% in the three months ended June 30, according to the latest S&P/Case-Shiller report. That is the first quarter-over-quarter improvement in three years.   This is good news.

The first time home buyer credit of $8,000, interest rates at historical lows, and housing prices dragging bottom, no wonder buyers with the ability are making their moves.   In a few months the landscape may be quite different for buyers, and apparently buyers know that.

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What’s happening with the Sequim and Port Angeles real estate market?   What about the national market, which we depend on so much?   Have we bottomed out and are we on our way out of the recession?

For a quick perspective and reference to a nationwide study, read Housing Market Comback.

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Where are all the buyers in Sequim and Port Angeles?   This is the question.   For those selling their houses, and there are several dozen each month, the buyers are here, but for hundreds of sellers, the question remains.

Real estate market cycles are a part of our history, and they are are part of our present and future.   That’s life.   That’s real estate.   My speculaton is that we are experiencing pent up demand that will come back with a healthy dose of buying at the right time.

When will that happen?   Six month?   Next spring?   Longer?   No one knows precisely, but it will happen.   As we eventually get past the poltical elections, and as the mortgage crises passes and as the economy gradually regains its footing, real estate will start selling again around the country, and buyers will be showing up in Sequim and Port Angeles.

One day we will look back at this difficult time and say, “Oh, yea.   Those were challenging times,” and the present enormity of our crisis will fade in our memories.

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The Sequim and Port Angeles real estate market is a wild ride lately. Everyone knows the market has slowed down. Some sellers have been impatiently waiting too many DOM (days on market), and it’s clearly a buyer’s market right now. But . . .

I’m having an incredible ride. Let me explain. I practiced real estate law for 20 years. Talk about a career full of disappointments and unhappy people! Hey, I had a successful practice, at least measured from a worldly perspective. Ninety five percent of my clients were referrals, and I never had to advertise, and I made good money for a solo practitioner, but . . .

The legal profession is full of liars and unhappy people. Who doesn’t know the judicial system is irretrievably broken with a house full of lawyers who have irreconcilable differences? So I decided to retire completely from law practice and start my own real estate brokerage. Thirty years ago I started my real estate career as a Realtor in Fairbanks, Alaska. I loved it.   Life has a way of coming full circle.   Did you notice that?

You say, “What a time to start a real estate brokerage!” I know. But . . .

I’m thriving, despite the challenges. Why? Let me extrapolate.   I started Sequim & Port Angeles Real Estate, LLC about five months ago. Here is the short version of what has happened in these five months in the slowest real estate market most of us have seen in decades.

I sold a house last February for $759,000 cash. Five months ago I sold a house for $425,000. The same week I sold two lots for $329,000. Those two transactions flipped. That happens. Oh well. Four months ago I sold a house for $210,000 to a first time home buyer with no money down,   and zero closing costs. Sweet.

Two months ago I sold a gorgeous water front high bluff lot for $200,000 cash. Happy clients. Two weeks ago one of my listings sold for $278,000. Nice. Last week I sold a house for $549,000 cash.

In this short time I have acquired 32 listings. I am very busy helping clients and prospects search for properties, consider investments, look for foreclosures, and list and sell houses and lots.

I’ve had one agent join my new firm already, and another is taking the online course to get licensed and work with me. My writing career has blossomed, and my real estate articles are published in many places,   in both hard copy magazines and on the Internet. I find that very fulfilling, personally and professionally.

This is a challenging time for everyone, especially sellers.   I am busy, and I feel abundantly blessed. That makes me happy, even on this roller coaster ride.

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In order to see what the Sequim real estate market will do in the months ahead, I track four important real estate markets, the markets where the majority of our buyers come from.   When all four of these markets begin to show improvement for a reasonable length of time, that will be a leading indicator that the Sequim and Port Angeles real estate markets are poised for a return to steady growth.

What are those four real estate markets?   They are California, Arizona, Texas, and the Seattle-Tacoma metropolitan area.   (As to how I know this, well . . . that’s practically patented information.)

Today, we have some good news from Texas. Here’s the graphic followed by an explanation:

“The average price of a single-family home rose by 8.0 percent in July to $226,072, second only to last month’s all-time record high of $227,274. The figure represents the biggest jump in average price since June 2006. The median price of a single-family home rose 3.4 percent last month to $161,370, surpassing its previous high of $160,000 in June 2007. Last month HAR reported a record median single-family home sale price of $162,000 for June 2008, however the revised figure for that month is $160,800. The median price is where half of the homes sold for more and half sold for less.”   This data is for the Houston area, courtesy of the Houston Association of Realtors.

Stay tuned for more updates on all four markets.

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Is the Sequim real estate market now at a bottom?   This is the ultimate question.   Sequim is largely dependent upon markets in California, Arizona, Oregon, and Texas believe it or not.   Are these markets and the national market showing signs of bottoming out?

If anyone needs hard evidence that the real estate market cycle is flattening out and turning around, check out the latest pending home sales index numbers.

On a national basis, the index jumped by 5.3 percent last month. But more importantly, it rose in every region of the country, suggesting that the turnaround underway is broad-based — even if it’s likely to proceed slowly and modestly in the months immediately ahead.

The index — which measures signed sale contracts that haven’t yet gone to closing — is a leading indicator of home sales for the coming two to three months. You can bet on solid increases in sales in the South, where the index was up by 9.3 percent, and in the West, up by 4.6 percent. Pending sales in the Northeast states were up by 3.4 percent and in the Midwest by 1.3 percent.

[Source:   Realty Times]

These are good signs.   Whether we are at the precise bottom or not, this is still a very good time for buyers to take advantage of low prices and the power they have to negotiate a great price.     In my opinion, prices will not go lower, or they will not go significantly lower in Sequim.   But when they do start to rise again, when the pent-up demand kicks in, prices will bounce upward, and any buyers hoping for a super price will be sadly disappointed.

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