James Lupori, Associate Broker Keller Williams Realty - 206.713.2102

Until recently, the Seattle area has been considered more insulated from the doom and gloom experienced by many other parts of the country. I’d like to think so. You would like to think so. The Real Estate Gurus would like to think so. The author of The Secret would like to apply the Law of Attraction and make it so…………..You know where I’m going with this: The economics of the Northwest are not exempt from the huge macro-economic problems faced by the general economy. And, yes, I will use the new lay-offs at Microsoft as yet another indication that even the high tech sector is finally feeling the contraction in our market. Ultimately, it’s the real-life phenomena of what economists call “the multiplier effect” that’s accelerating the contraction of our local economy:

It’s the old rule-of-thumb: Every job at Boeing multiplies into seven other local jobs. The calculation for Microsoft is around three other local jobs. I’ve personally witnessed this as I’m sure you have. Almost all of the businesses here in Kenmore that I patronize have recently laid-off employees. The irony is these owners have business, but they simply cannot afford the overhead of employees. And here’s the sobering fact: most economists I’m listening-to say it’s going to get worse before it gets better. For example, according to a report published yesterday by the Northwest MLS:

“The industry is facing multiple disconnects,” said ULI Senior Resident Fellow for Real Estate Finance Stephen Blank. “Many property owners are drowning in debt, lenders are not lending, and for many (industry professionals), property income flows are declining. There is an unprecedented avoidance of risk. Only when financing gets restructured will pricing reconcile, giving the industry a point from which to start digging out of this hole.”

And here are a few snippets from the SeattlePI’s Aubrey Cohen, Lowest home sales of decade:

Total sales of houses and condominiums in King County were down more than 36 percent from 2007 and the lowest of any year this decade, according to a report Thursday from the Northwest Multiple Listing Service.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said the listing service numbers match what he expects to show in a year-end report he plans to release Feb. 12.

And the article goes on with Lennox Scott, self proclaimed industry spokesman, who as always is saying this is a great market for step-up and first time home buyers.

But Crellin took a different view, saying: “I think 2009 is going to be a very challenging year.”

Foreclosures probably will increase as payments reset upward for people who bought homes in 2006 using loans with artificially low payments for three years or charged interest only over that time, Crellin said. Microsoft’s Thursday announcement that it was laying off 1,400 people immediately as part of 5,000 job cuts over the next 18 months didn’t help, he said. “Many of the Microsoft jobs are folks that would otherwise be active in the ownership housing market.”

Here’s my sense of the market given all the information I’ve been reading: We haven’t reached the bottom yet. I believe we are not going to see a rise in real estate sales until the whole financial system stabilizes which is going to take many months to occur. In the mean time, the local market is going to be tough.

It’s not the greatest news especially if one is trying to sell a house. It is an opportunity for buyers to start doing research if they are interested in purchasing, but I have a sense that buyers are going to remain reluctant to buy until some semblance of confidence comes back into the market place.

Utterly Confused courtesy of inju

Wisdom Comes in All Forms!

Yesterday, right ahead of the Inauguration, Adam Carolla, the morning-radio-talk show host, made one of the most insightful comments about the American psyche that I’ve heard in a long time. He said that Americans are some of the toughest self-critics in the world. We are really hard on ourselves as a nation: we’re demanding of our government; we’re critical of each other; we question our collective values; and, clearly, we can sometimes be very mean to each other. He made this observation with regard to Barack Obama and the incredible excitement generated by his election. Adam said it felt as if our collective self-loathing had been lifted, if only for a moment.

Now, I must confess, over the last several days, I’ve been spending time in the blogosphere reading commentary on some very popular sites and I’ve jumped in on several fairly heated (and ofttimes disagreeable) discussions about how the country has been lead in the past and what’s going to happen now that there’s a new sheriff in town. I have to tell you, some of it is really, really ugly stuff. Don’t go there if you don’t have a thick skin. On the other hand, I’m impressed with the intense thoughtfulness of most of the writers even though some of them utterly infuriate and, more importantly disappoint me. I want to believe that we are, at our core, a good people….

Then it occurred to me that the Founding Fathers INTENDED our political process to be this way. In a sense, the constant revolution that Thomas Jefferson wrote about is alive and well in America today. It’s not a bloody revolution, it’s the battle that Adam Carolla acknowledges (this tendency to navel-gaze). Every four years we literally reinvent our leadership. Sometimes it’s a grand revolution and at other times it’s mundane and at others it’s a knock-down drag-out fight as was this last one. The victors celebrate and rejoice. The vanquished stew in the bitter broth of resentment and plan a new revolution. I find it disturbing, frustrating and strangely invigorating. I suppose it’s one of those things that makes us….well, us.

So here’s what I’ve done to refocus myself on the big picture and help me celebrate the brilliant system the Founding Fathers created: I’ve listed all the Presidents who have held office since I’ve been alive. This helps me put things in perspective. We are one of a few nations in history that passes power from one administration to another without bloodshed. Since I’ve been alive, I’ve voted in 8 presidential elections (haven’t always been on the winning side), and I’ve truly hated some of these men. And yet, our system works. It’s truly magnificent:

Dwight D. Eisenhower, John F. Kennedy, Lyndon Johnson, Richard Nixon, Gerald Ford, James Carter, Ronald Reagan, George H. W. Bush, William J. Clinton, George W. Bush and Barack H. Obama.

What an amazing list of individuals!

CHANGE.GOV - SPEAK OUT, SPEAK NOW!

As the Inaguration of President Elect Barack Obama quickly approaches, Americans know that we face an incredibly challenging future. To say that Mr. Obama has taken on the troubles of the world is an understatement. Now here’s something interesting: The Obama Transition Team is actually asking us, you & me, to give our suggestions and tell our stories. They actually want to hear our ideas to help solve the problems we face.

I spent some time looking through the suggestions of a lot of people on Change.gov just to see if the site would be filled with cynical, angry commentary. On the contrary, there are a lot of thoughtful and concerned Americans who have some excellent, creative ideas. Why don’t you add yours to the list?

If you are interested, just click on the picture below:

The National Association of Realtors has unleashed a media campaign with the theme "Affordability has improved!" When I heard this on the radio this morning, I had to stop and consider whether this is true. After all, home prices are dropping and interest rates are at historic lows. Sounds good. Sounds really good......................but, let's look at reality for a moment:

Today I'm going to share some sobering and grim real estate statistics from both a national and local perspective. Please believe me, for those of you who have excellent credit, secure employment, cash reserves and a desire to purchase a home, this may be an "affordable" market. But, let's not sugar-coat the overall market. It's still a risky place to be:

Foreclosure Filings At Record Highs - UP 81%

Here are several snippets from an Associated Press report today regarding home foreclosures in 2008:

• More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007

• Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level

• The four states with the highest foreclosure rates last year were Nevada, Florida, Arizona and California

• Moody's Economy.com, a research firm, predicts the number of homes lost to foreclosure is likely to rise by another 18 percent this year before tapering off slightly through 2011

If you're an optimist, this may be good news. Indeed, this will expose a huge number of properties to potential buyers, possibly at bargain prices. The down side is illustrated in an old rule of thumb regarding foreclosure: for every home in a neighborhood that goes into foreclosure, the value of the neighborhood drops by 1% of sale value. So, even if your neighborhood is weathering the down market well, the adjoining neighborhoods may very well cause downward pressure on your property values. Remember, whether you like it or not, we are all in this together.

ABSORPTION RATES IN PUGET SOUND, KING AND SNOHOMISH COUNTIES

Absorption rate = Number of weeks/months it takes to sell the current inventory at the present rate of sales.

I have assembled the graphs below to illustrate the absorption rates for our local market. If you want to look these over in detail, just click on the graphs:

KING COUNTY, WA ABSORPTION RATES - 2003-2008

One positive event was the drop of almost 15% of the active homes & condos from the market in December. This should have happened far earlier in the year. Having said this, it's very important to note that only 10% of the available inventory went pending (offers were accepted). One must also take into consideration that a significant number of these pending sales are a result of short sales. This means the transactions may never close before being sold at auction.

PUGET SOUND ABSORPTION RATES - 2003-2008

As a whole, Puget Sound absorption rates in December were even lower than King Co, at 8.2%. There was a 13% drop in active listings.

SNOHOMISH COUNTY, WA ABSORPTION RATES - 2003-2008

Snohomish County was a bit of a surprise with a slightly higher absorption rate than King County at 10.2%. There was also a drop of almost 13% in active inventory.

So let me be clear: we are in the midst of extremely difficult times in real estate. I take offense to any blanket statement that "now is a good time to buy a house." This is simplistic baloney. There are simply too many factors outside of low prices and interest rates that affect the market today. One final thought: as you look at the graphs above, they look rather pathetic. The lines on the graph have managed to hit rock-bottom. I suppose the only way to go is up. Just make sure if you jump on the ride, wear your seat belt!

Monopoly picture courtesy of vinduhl

Let’s start with a definition. What is Market Share?

Market share, in strategic management and marketing, is the percentage or proportion of the total available market or market segment that is being serviced by a company. It can be expressed as a company’s sales revenue (from that market) divided by the total sales revenue available in that market. It can also be expressed as a company’s unit sales volume (in a market) divided by the total volume of units sold in that market. It is generally necessary to commission market research (generally desk/secondary research, although sometimes primary research) to estimate the total market size and a company’s market share.

Yesterday, during a conversation about the Kenmore housing market, one of my neighbors asked me who held the largest market share in the local real estate market. “That’s easy,” I said, “it’s Windermere!” The answer came out of my mouth before I even really thought about it. It’s a perfect example of how powerful branding and brand recognition is. Heck, I work for Keller Williams Realty which is the fourth largest brokerage in the United States. I’m proud of that, BUT, how much real estate is Keller Williams Realty selling locally? Well, curiosity got the best of me and I consulted one of my statistical databases. I limited my search to the percentage of combined sales (both listings and selling transactions) and the simple number of transactions by each company. Here’s what I found:

MARKET SHARE - THE WHOLE PUGET SOUND 2008

MARKET SHARE - KING COUNTY 2008

MARKET SHARE - KENMORE, WA 2008

MARKET SHARE - SNOHOMISH COUNTY 2008

It’s clear that Windermere is the dominant real estate brokerage in our market place; however, we can also see that “All Others” (meaning the total of many smaller brokerages) actually capture more of the market share as a whole. The logical question then is: “Isn’t Windermere the best brokerage in this area?” In the past decade, certainly, Windermere has been the dominant name in real estate. There has been an increase in the number of smaller brokerages (and the other larger competitors) that have been eating away at Windermere’s market share. It will be interesting to see how all of the dominant players perform in 2009.