Kenmore, WA

Brad Listi, a contributing writer to the Huffington Post asks a clever question today: What Do We Call the current Financial Crisis? After all, most historical events don't get named until after they happen: The World Wars, the Great Depression. He's actually come up with some good names for what's going on today:

The Not-So-Great Depression, The Greed Depression, Americorpse, The Boomer Bust, and there are others! This is good stuff. But I believe there is a deeper question to ask. It will determine if we come out of this "depression." What Are People For?

“Those who cannot remember the past are condemned to repeat it. In the First stage of life the mind is frivolous and easily distracted it misses progress by failing in constructiveness and persistence. This is the condition of children and barbarians, in which instinct has learned nothing from experience.”

George Santayana, The Live of Reason, Volume 1, 1905″

More grim news filled the headlines this last week. The most disturbing revelations had to do with the loss of 2.6 million American jobs in 2008. According to most analysts, this is the worst drop since 1945. Here in the Northwest, Boeing Company announced that it will eliminate 4500 local positions in the Seattle Area. Closer to home, I’ve reported (on this blog) that the housing market in my town, Kenmore, has been in decline and that many homeowners are defaulting on their mortgages. Closer still: several of my colleagues are in the process of losing their homes or filing for bankruptcy.

Indeed, America has faced difficulty in the past, but we are in the midst of a financial/cultural shift that will, I believe, determine the strength and survival of the American way of life. It’s clear that we need to transform our fundamental way of conducting business, the way we regard each other and the way we view our position in the world. If we do not ask the right questions or ignore the facts we are destined for failure. Will history repeat itself?

WENDELL BERRY - WHAT ARE PEOPLE FOR?

Wendell Berry is arguably one of the most profound and prolific American writers about the marginalization of American farm life, local sustainability and preservation of THE LAND itself. In his brief 3-page essay from 1985 entitled “What Are People For?” he captures brilliantly the ethos of that time in American history when a way of life, the American small farmer, was being replaced by computerization, mechanization and automation. It’s interesting to note that the 1980’s were a time when corporate America was given license to shed employees and become more efficient in the name of “free market capitalism.” As Berry writes:

“Today, with hundreds of farm families losing their farms every week, the economists are still saying, as they have said all along, that these people deserve to fail, that they have failed because they are the ‘least efficient producers,’ and that the rest of us are better off for their failure.”

Lately, I have noticed a lot of finger-pointing about who is to blame for the financial/housing crisis that is causing job loss, home foreclosures and broken families. It’s human nature to place blame and seek justice. Sure, I get that. What so disturbs me is our tendency, as Americans, to condemn our neighbors for not taking “personal responsibility” for their actions. I believe we have all been hypnotized by a belief that the free market is the answer, that serving corporate interests is the goal. I also believe we all need to take time and reflect on what Wendell Berry so elegantly states:

“The great question that hovers over this issue, one that we have dealt with mainly by indifference, is the question of what are people for. Is their greatest dignity in unemployment? Is the obsolescence of human beings our social goal?”

I sincerely hope that the policy changes and stimulus packages of the next administration are EMBRACED by Americans. It’s going to take everyone, working together for a common cause to transform our economy and put Americans back to work. So, the next time you find yourself judging someone who is blue-collar or your neighbor who is having financial problems, ask yourself if we are all merely functionaries designed for the purposes of lining the pockets of our corporate superiors or are we something else. I think you know the answer!

Kenmore maintained a large inventory of single family homes in 2008. On any give day there were over 200 homes for sale; however, this changed in November and December. Today the inventory has dropped quite a bit as there are 149 active listings:

SNAPSHOT OF ACTIVE LISTINGS TODAY

The majority of homes are between $350,000 and $550,000. The average days-on-market are a little over 3 months. I’ve noticed that a lot of resale homes have dropped out of the game since November. We may see them return as Spring approaches (and the sellers sober-up about pricing). Even so, 44% of listings have experienced price reductions, some being significant. It’s also interesting to note that almost 35% of the homes for sale today are new construction.

PENDING SALES - LARGE % OF SHORT SALES

The good news is that houses are selling in Kenmore. The bad news is that 58% of the pending sales today are SHORT SALES. For those of you unfamiliar with the process of short selling a home, I highly recommend you read: How To Do a Shortsale to better understand the process. The Wikipedia definition is helpful:

In real estate, a short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor.

We are living in some extremely challenging times. If you, members of your family or your friends feel that they are having trouble making their mortgage payments, it is imperative that you/they seek the advice of an attorney to determine if a short sale is your best course of action. There are some serious consequences as a result of selling your home short, most of which are negative: Tax exposure, Credit Damage, Legal Problems and a myriad of other issues. Although one might be tempted to choose this course, there may be better alternatives. I highly recommend you contact the law offices of Dale J. Galvin of Galvin Realty Law Group with your questions. Click on the picture below for more information about Dale and his services:

Only time will tell if Barack Obama’s new administration will have a positive influence on the real estate market. Many of the economists I’ve been listening to (cranky folk they are!) feel that we’re in for a tough 2009. I’d like to make this point in spite of all the bad news: If you are ready to buy a home, you need to do your homework. Assemble a team of professionals (e.g. mortgage lender, real estate agent, accountant and attorney) and proceed with confidence!

Utterly Confused Courtsey of inju

The Northwest Multiple Listing Service released it’s monthly press release for December 2008. The results from 2008 were as one would expect - heart breaking. It was not hard for market observers to guess that the sour financial markets and the insane weather this last month basically knocked-out home sales with a big left hook in the last round of 2008. Ouch! Bloody nose!

I’m going to stick with basic home sale statistics for Kenmore in this post. In the next several days there is going to be a lot of year-end data and analysis that I will share with you. For now, let’s keep it simple and local. Just click on the graphs for a large, more detailed image:

UNITS SOLD

UNITS SOLD, 4-YEAR TREND

Numbers: 2005 - 42 sold, 2006 - 24 sold, 2007 - 19, 2008 - 13

There has been a steady decline in home sales here in Kenmore since 2005. What’s interesting is how precipitous the decline was between 2005 and 2006. The change was not as significant comparing this year to last, a sign that the market was already weakening two years ago.

AVERAGE PRICE

AVERAGE PRICE - 4 YEAR TREND

PRICES: 2005 - $388,000, 2006 - 470,000, 2007 - 430,000, 2008 - 438,000

The media has been quick to point out that prices in the Seattle area have fallen to 2006 levels. Kenmore seems to be experiencing more of a flattening-out since the beginning of 2007. Home owners in Kenmore haven’t been immune from a stagnant increase in equity. It may be some time before we make up the losses in the last three years.

DAYS-ON-MARKET

DAYS-ON-MARKET - 4 YEAR TREND

DAYS TO SELL - 2005 - 48 DAYS, 2006 - 70, 2007 - 62, 2008 - 103

A lot of agents are reporting how difficult it has been to sell homes in the current market. As you can see, it’s taking over 100 days on average to sell a home. If you’re going to enter the market in the current environment, it is critical that you have your house priced aggressively and ensure that it is properly presented (dressed for success). Even though interest rates have dropped to historic lows, buyers are still sitting on the sidelines in the hope that prices will fall further.

If you are considering selling or purchasing a home, please give me an opportunity to consult with you to explore your options. Even though there are a lot of “experts” saying that it’s an ideal time to buy a house, you owe it to yourself and your family to work with an agent familiar with the market.

Statistics Often Lie courtesy of mac steve

The Real Estate gods must have been connecting the agent subconscious yesterday. As I was writing about the influence of technology on the real estate industry, Ardell DellaLoggia of Rain City Guide was writing an extremely thought provoking post entitled: Open Letter to NWMLS and Local Agents. Ardell asks us to consider the functionality of the MULTIPLE LISTING SERVICE which is the hallmark database used by real estate agents. In short, she believes the system is broken and it needs repair. It no longer adequately addresses the needs of the consumer or, for that matter the agents.

I agree. I believe that the age of agent-controlled multiple listing services are coming to an end, much like the Alaskan Way Viaduct here in Seattle. They are functional, utilitarian (if you have access), ugly and fatally flawed by an outside source (e.g. The 2000 Nisqually Earthquake). Those of you who have driven over the Viaduct know what I’m talking about: it certainly gets you where you need to go, but access to it is limited, it’s claustrophobic and your choices of exits are limited. One feels trapped. Knowing it could fall down at any moment isn’t comforting either! There is hope on the way and one of the cavalry is Estately.com.

Estately.com very well may be the future of consumer real estate services in terms of property research and statistics and agent referrals. It’s not yet ready to take on the multiple listing services; however, there are a lot of very smart people behind the scenes at Estately who may very well break the information log jam created by the real estate insiders.

Galen Ward, the CEO and co-founder of Estately deserves the credit for putting together a wonderfully functional system at Estately. As a Realtor who focuses-in on Kenmore, WA I was impressed with the ability of Estately to provide excellent real estate data for Kenmore. Additionally, if one wishes to work with a neighborhood specialist, Estately provides referral services.

As I mentioned above, large structures like the Alaskan Way Viaduct don’t last forever. Sooner or later an earthquake or other huge event breaks them. In the coming years, I believe the real estate industry is going to be broken apart and re-tooled by new technology and new business models that allow consumers a much wider range of options. This isn’t news, but we are beginning to see evolutionary services such as Estately more and more. Change is inevitable and I’m looking forward to what’s coming

A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across a market. In other words, copper is copper. Rice is rice. Have real estate services become a commodity? Let’s examine this idea:

OUR FIRST HOUSE IN SHORELINE, WA

My wife and I purchased our first house in 1989. It was a small 2 bedroom, 1 bathroom home in the Shorecrest neighborhood of Shoreline, WA. We lived there for 16 wonderful years. It was 810 square feet, had a perfect-sized yard (about 6000 sq ft) and I remember we bought it because there was a raspberry patch in the back yard!

THE VALUE OF A REAL ESTATE AGENT THEN

The real reason we purchased that particular house was because we were working with a good Realtor. In the late 1980’s there was a rush to purchase homes as property values were rising quickly. This was due, in large part, because the Puget Sound was experiencing a huge migration of people, especially from California. We were afraid that we would be priced out of the market, so we went in search of our first home.

We worked with our agent for about two months, made several unsuccessful offers and were beginning to get worried when our agent was tipped-off about a house that was being remodeled by an investor. It was not yet listed. We rushed over to see the house, decided we liked it and wrote an offer on the trunk of our agent’s car at the Bite of Seattle. It was an exciting event. The house cost us $85,000.

Please ponder this for a moment: in the 1980’s there were 30-year mortgages and much tougher underwriting criteria. There were no mobile phones. Our agent used print-out reports that were produced by the “multiple service” only periodically. No one “owned” a fax machine, you had to go to an office or your bank to receive documents. There was no Internet, no websites, no blogs, no text messaging, no social networking……………….my gosh, email didn’t exist……..So why did we work with Margie, our Realtor?

1) She was highly recommended to us by a colleague of my wife. As it turned out, this was a good recommendation. She had years of experience and was great to work with!

2) She worked for a reputable real estate brokerage. The agent’s brokerage was located in the vicinity of the neighborhoods we were interested in.

3) She had access to the “listing information.” All we had were newspaper ads and yard signs.

4) In our world, she was an expert in the marketplace. We simply did not have resources or time to do our own research. Real estate was (or was perceived as) a complicated and difficult business.

To this day, I feel our agent’s greatest value was her ability to give us access to potential homes and facilitate us through the sale process. Additionally, she was sharp enough to keep her eyes and ears open for a home that was not on the market.

HIRING A REAL ESTATE AGENT TODAY

Let’s say you were going to purchase or sell a home this month, January 2009. And let’s say you were looking for an agent. What criteria would you use in today’s world, to select a real estate professional? Let’s use me as an example. How do I rate with my own criteria of 20 years ago:

1) I have been a Realtor for almost eight (8) years. In this time I have helped close to 100 families purchase or sell their homes. I am an Associate Broker. I specialize in North King and South Snohomish residential properties. My particular expertise these days is my current home-town, Kenmore, WA. In short, unless you and I have a personality conflict, I have the makings of a good agent.

2) I have worked for two very reputable brokerages: Prudential Northwest Realty and, currently Keller Williams Realty.

3) I have access to highly sophisticated technologies and databases that allow me to gather and interpret a huge amount of information about the real estate market. My main source of information as an agent comes from the Multiple Listing Service to which I subscribe. Non-professionals don’t have DIRECT access to this data. What do you, the consumer, have in today’s world? No longer does the consumer have only newspaper ads and yard signs. The consumer has access to highly sophisticated technologies and databases that allow them to gather and interpret a huge amount of information about the real estate market.

4) I consider myself to be an “expert” in residential real estate; however, is my value as a broker of information and market knowledge as valuable in today’s world?

REAL ESTATE REALITY IN THE 21ST CENTURY

“I’m worth every penny for my services and I’m not cutting my commission!” Such is the mantra of most real estate agents. Unfortunately, the market (and the consumers) don’t really care what real estate professionals think. With the advent of new Internet technologies, consumers simply don’t need to rely on real estate agents the way they once did. To the public, there is little differentiation between us. We can no longer claim to provide “value-added” to this part of our services.

In the last year, I have communicated with many agents who describe situations in which they had been working with “a good client” only to be released when a “less expensive” agent agreed to write a contract. One agent cynically said, “there will always be someone out there who will do the job for less.”

The professional’s “value proposition” has been diminished because of the information age. In his provocative book Freakonomics, economists Steven Levitt and Stephen Dubner suggest that real estate agents are like the KKK because both groups traffic in “secret information.” In the case of real estate agents, this secret information has traditionally been the listing service. Indeed, this was very much the case when I bought my first home. Not anymore. In fact, I believe that a large part of professional real estate services have been com-modified.

Please understand, I believe you should use an agent to help you buy or sell your home. I’ll be the first to tell you that dealing with all the details and emotional baggage in a transaction should be facilitated by agents. AND, consumers need to understand that real estate professionals deserve to be paid for their services. I, for one, am not running a non-profit corporation; however, I have come to the realization that my value is no longer tied to the “research” end of the process.

I appreciate any comments you have on this subject both as consumers and agents. The reason I wrote this post is because I believe the difficulties we are facing in the financial and housing markets along with advances in technology are going to forever change real estate services. The classic brokerages and business models are under huge stress today. Many are closing while others are attempting to redefine their relationships with the agents. Let me know what you think.