Notes From the Trenches
Last Wednesday there was some great conversation about what people are experiencing as they are out there right now trying to find a home. I think it's worth re-posting these comments on the front page, since they give a good feel for what the housing market is really like right now that you can't get just by looking at graphs and spreadsheets.
Peter:
I've actually started looking seriously at homes in the $400k-$500k range and have toured probably at least a dozen from the Kennydale Area up to Juanita/Kirkland. Here's what I've noticed:Alan:
1) Pretty much everything you've heard about flipper renovations is true. These people are morons. I've seen some work so shoddy that it would blow your mind. We toured a home in Newport Hills and the owners were still there - he pointed at the electrical plates and said, "we upgraded to the latest style!" Um, yeah. You went to Home Depot and dropped a hundred bucks and spent the afternoon with a flathead screwdriver. No.
2) The $400k-$500k unrenovated properties are bottom of the barrel garbage. Borderline unliveable. Most of these are in such a state of disrepair they will probably need to be torn down. We saw a house in Finn Hill that had been vacant for quite some time. It smelled like death. My wife said, "this place is haunted!" I saw something - I'm not sure what - but it was brown, papery, and slightly organic looking in the fireplace. I asked our agent what it was and she just said, "let's get out of here!" And a steal at only $450k.
3) Prices are all over the board and don't appear to be based on recent nearby sales or appraised value + whatever. People are just asking whatever they feel like and seeing if they can get any bites.
4) The increase of inventory is definitely accelerating. It's all crap though.
5) Most builders are idiots. They will shoehorn a house into just about any space, regardless if the front door of one house is directly facing the house next door. Yeah, I want to look out of my living room window and see my neighbor reading the newspaper in his bathroom. Most are still not offering concessions.
6) I'm not seeing any of these houses move. No one is buying them. However, if a decent house at a decent price does get listed, it is snapped up immediately. The crap is sitting forever though.
7) This has been one of the worst and most depressing experiences of my life. I've seen more than one house that *could* have been nice but had been ravaged by a flipper and had the price jacked up $100k from the purchase price a year ago. It seems every flipper runs out of money and you can tell exactly where they did - 4 out of 5 rooms will have hardwood floors, for example. The last one will have 30 year old filthy carpeting in it. 3 out of 5 closets will have been redone - the last two look like something like the meat locker from Texas Chainsaw Massacre.
Anyone who thinks this is a "healthy market" is certifiably insane.
I know what you mean, Peter. My wife and I went to an open house a few weekends ago. We could tell that the owner had done some shoddy renovations, but we thought we would have to redo it and so we would have wanted a discount *because* of the renovations (if we had even wanted the house -- which we didn't because the floorplan was horrible).B:
I enjoy messing with the realtors. They ask if I am in the market and I say, "No, I'm currently priced out of this market. I only make $X per year." (where X is significantly above the mean income for the area). The last realtor I said this too got excited and started telling me that the owners would probably sell for less than the asking price and that he could get me a good deal on the house.
Peter:stephen:
Wow, I haven't been looking as hard at as many properties as you have, but your observations exactly parallel my own. What a strange twilight-zone of inventory and comps we're looking at right now.
I came back from the last place we walked through (SFH in Greenlake listed at $699, which was absolute junk inside) with a resolve to renew my apartment lease through 2007 - let the flippers flop.
The only thing worth less than a "fixer" is a house where someone did a crappy remodel/flip on a fixer. Now I have to tear out all your shoddy garbage and re-do it. Honestly!
If you are going to buy (like we are) it is extremely important to do loads of homework and tons of driving. We've been looking since the first and still haven't set foot in a house. One passed the drive by sniff test but fell out due to the flood report.So have any other readers been out there looking at homes? What have you experienced? Is the market as strong as local real estate agents would have us believe? Let's hear your tales.
31 comments:
here is another flipper in sandpoint area. this house was bought for $400K a year ago. it is now available for $700K. nice appreciation.
http://www.redfin.com/stingray/do/printable-listing?listing-id=358044
another flipper in sandpoint right across the street for $625K. they both are competing with each other.
These comments are in line with my observations of the Eastside market. The flipper phemonenon is frustrating, because normally money is spent on stuff that I don't like and it just makes the seller want more money.
BTW - I think that people are too harsh to the Sash guy posting here. Because of the glut of low quality stuff in the Eastside, anything which is not crappy does sell pretty quick (unless the price is way out of line). Try a search for property below 600k that is less than 15 years old in Redmond and see how much there is. Try searching for SFH only and see how many townhomes come up. The reality is that in the price range that MS people can afford, there is hardly any SFH product on the market that is not old.
My feeling is that people will see sales continue to be slow when the weather picks up. The funny money is drying up, and if the loan requirements become stricter it will hit sales even more.
We will probably see a prolonged price stagnation over summer as the sales become more slow, but I don't think that serious dropping will occur until 12 months from now when people who have to sell finally cut the price some.
So, um, what makes a house "garbage"? Or "POS"? I keep seeing people describe houses listed at 2x my house's value that way, and I'm curious what kind of hovel I must be living in.
"Smells like death", ok, I get that. But what minima are you guys looking for that these houses aren't meeting?
Here are my top things that turn me off a property:
a) No yard for a SFH. This makes no sense for me - if I want no yard then I will buy a condo/townhome thanks.
b) Popcorn ceiling. This looks incredibly tacky, and a PITA to remove.
c) Built during the asbestos era. Call me picky but I don't want to deal with a house built before they outlawed this stuff.
d) Dodgy old kitchens. When the countertops are particle board lined with linoleum, with yucky oak trimming on cupboards and a stove with those coil things. When I had to rent an apartment this is what I had, and I never have any intention of going back.
I also label something a POS if it is clearly much older and lower spec than the new construction that I can buy for the same price. On the Eastside people want the same money for their 25 YO rambler as for the new construction in the same area. The only real upside is the yard size (because local builders are forced to build on postage stamp sized lots).
If your house is 25 YO, has a hugely outdated kitchen, cheap oak floorboards or linoleum and a brick fireplace with a 1800s era stove sitting on it then it is worth less per sq ft than something with real hardwoods, modern appliances and gas fireplaces.
"Garbage" is a pretty subjective term, but for my wife and I it's a house that we can't move into and live in without some major work. Stuff like kitchens that has old and broken appliances, crusty old carpeting, bathrooms that can't be cleaned without tearing out tile and/or floors, etc. etc.
Just as an FYI - we've seen VERY few houses that meet even this most basic criteria. And the ones that we have seen that do meet the criteria are only on the market because they priced unrealistically and the sellers are unwilling to budge.
I went to a flipper open (flopen?) house in Loyal Heights a few months ago. These idiots did not even bother to shim up/level the subfloor before they intalled the fake-tile-vinyl. At one transition point, there must have been about 1 inch of airspace between the vinyl and the subfloor.
I agree that the houses are actually worth less after the flipper gets to them. Sort of turns the place into a home improvement superfund site. You can't get started until all the pollution is abated.
If the emperor had no clothes, it is exemplified in Ballard crapholes today. People are so ga-ga over the neighborhood they are buying shacks for 600K.
Eastside RE Shopper, I think you are making the SAME observations as I am. Basically my point is on the east side, under 600K you will get a larger yard, however a really outdated house in terms of layout, design everything. I would also add that there are folks who do some remodel to their old homes and try to sell for a ridiculous prices with just 2 points - large yard and their fancy upgrade. If you look closely at these homes u will see that the upgrades are cheap at best and poorly done.
Over 600K are the nicer homes, ofcourse smaller yards, newer layouts everything.
I feel we are heading towards a CA like market. Partly due to the influx of CA folks here with HUGE cash pile.
The biggest bummer in this whole thing is the lousy transportation system - interstates with fewest lanes and a traffic night mare.
There are families now who dont mind smaller yards but good living space near work due to this night mare, especially families with small children. I am sure 2 hours in traffic every day with young kids in a day care is just not worth it.
MS atleast is expanding even now. My group is looking to hire 100 people and the problem is they cant find them!
Man. You guys are picky.
I'll take out-dated any day.
The new construction is what scares the bejusus out of me. I have watched house after house go up with the shoddy work done underneath, then the more experienced detailers come in and cover up the crap with hardwoods and granite.
I would rather someone else test out whether the water damage, mold, electrical shorts and such are just around the corner, thanks.
I will certainly also take out-dated over garages turned into "bonus rooms", weekend warrier additions with uneven or slanting floors, and other "updates" which I would have to tear out, but for which the seller wants 200% of their time and money compensated for in the price of the house.
I dream about out-dated for a reasonable price.
I think I was too hard on you, Sash. The first couple of comments I read from you made me assume you were a realtor. Realtors are not my favorite people right now. I'm trying to combat a hard-sell realtor who's gotten a hold of my naive sister down in Portland.
I pretty much am at the point where I am telling her all Realtors are CIA plants and all the houses they show are wired for sound and video right into Langley. She's susceptible to conspiracy theories. ;)
Sash brings up an interesting point.
Will it be harder and harder for companies such as Microsoft to attract skilled workers? Quality of life is going down in Seattle at a pretty fast clip, most notably in the areas of traffic and home affordability.
San Diego has started to feel the pain in this realm. Many high-tech companies there complain they can no longer attract the talent they need because employees cannot afford a modest place to live.
Market forces are already correcting that in San Diego. Will that happen here?
biliruben - you are right. Outdated, but good bones = a gem.
Folks, sorry for this off-track post.
Sash,
can you please send me an email boopda@gmail.com. I am looking to change my job but do not know anyone at MS to send my resume to. We can also discuss the opportunities offline.
Thanks a bunch!
biliruben - I'd take outdated as well. The problem there is that the outdated houses with potential are on the market because they are priced unrealistically. These people look at the prices flippers are asking and assume they'll get the same because the "market it on fire".
I think we're at the seller/buyer staredown point, and we're waiting to see who blinks first. I'm betting it's the sellers.
"So have any other readers been out there looking at homes? What have you experienced? Is the market as strong as local real estate agents would have us believe? Let's hear your tales."
I live in a small community in Kitsap County named Brownsville, which is about 3 miles SE of Silverdale. It's rural and Brownsville's main distinction is that it has a marina. My neighborhood is a "mixed" neighborhood trying to be upscale, with newly built million dollar waterfront homes and single wide mobile homes overgrown with blackberry bushes within 1/10 mile of each other. I can look out my living room window and see the western shore of Bainbridge Island and with a telescope I can see Bainbridge residents washing their BMW's in their driveways and polishing their diamond jewelry in the security of their luxurious waterfront homes.
Brownsville is representative of everything written about on this blog. My next door neighbor is a California transplant who bought a 7 year old 3500 sq ft house for $710,000 last March. It was put on the market at $673,000 and it sold within a month. The county had assessed the place for $450,000. We have the unsuccessful flipper a few doors down. He made remarkable progress upgrading the exterior of an older home and did some quality landscaping (but left the interior a mess) and then one day he and his family just packed up and left. The property went into foreclosure because he apparently neglected to make payments on his mortgage. We also have a couple of successful flippers, one of which bought a 2 bedroom, 2 bath 2600 sq ft (including 1500 sq ft unfinished basement) home for $366,000 in March 04, did nothing to it, and sold it for $490,000 in Oct 06.
The overall impression I get from observing the activity in my particular neighborhood, is that if it weren't for the older affluent California transplants, nothing would be selling.
Based on the descriptions, I think "POS" may be a little harsh for some of these places (which is not to say that they are good deals). Like a lot of bubble terms, this epithet became popular in markets like SoCal and DC, where truly unlivable crap was on the market at inflated prices. The other night I watched one of the flipper tv shows where a guy in LA bought a literal crackhouse for over $500/sqft. This place had no flooring, the bathroom looked vile (and I imagine smelled the same), the kitchen was a wreck and had no appliances. It had no bedroom (studio style) and was only 375 sq ft. The guy paid $190K for it. This was a true POS. Outdated trim and fixtures may be a turnoff, but to me it takes a little more than that to make a POS.
Oh....
You are interested in actual POS. ;)
This one's around the corner from me, and has been on sale on and off for most of a year. It was listed originally at 250K, maybe 6 months after purchasing for 191K. He's since dropped it down to 230K, and no bites.
Here's the description:
Back on Market due to buyer financing. Looking for a project? This is it! Some options: (1) Tear the house down and build another on a wonderful, private lot with Cascade mountain views in a fab Shoreline neighborhood or (2) Fix up the potentially charming 2 bedroom house (currently boarded up - enter at your own risk) that sits on the property now or (3) Something else that you dream up. A wonderful project in a great location; what fun!
What fun indeed.
It's all relative, but I was appalled that he was looking for more for a tear-down then I had paid for an actual move-in ready home a year previous. If someone's asking 600K, however, I am apt to sputter "for THAT POS!?!" even though it may be twice the house I currently own (and really quite like).
Hey! I just noticed that the property has finally gone STI. New neighbors!
Careful with that inspection, buddy. ;)
Ok, fair enough. FWIW, my house was built in 1950, with an old-fashioned layout and kitchen upstairs (and I ripped out the basement to renovate to my own weird tastes). It's structurally fine, but certainly has no bells or whistles.
Easy. Search Redfin for residences that are $350k and under. You will find a bunch of condos between 400-1200 square feet that I am not willing to live in for ten to twenty years.
first time blog contributor, but two decades selling kingco real estate. most of what I'm reading is right on! lots of crappy inventory and sad flips. best suggestion for keeping a positive outlook is that once you are educated stop looking yourself. download your goals to a commited Buyer's Agent who will immediately pre-screen Everything and never cry wolf. Your end of the equation is to be financially prepared and ready for the "drop everything" call to see the really great properties that still absolutely do come up. Be prepared, also, for competition on these rare good ones and know up front how high you'll go so you don't end up as the greater fool...winning by paying way too much. Your agent should already know your energy level, reserve funds, and skill sets so you don't get into repairs and remodeling that is over the top. Your agent cannot be hungry or there will be too much motivation to get a closing check. Your agent also can't be blase.Key to the whole thing...hire an experienced, passionate, slightly crazed agent who knows you're loyal and who cares about your new home likely even more than you do yourself! We're few and far between, but we're out there and for real. This process hasn't been coherent for two years. It should be fun; right now about the best you can do is make it successful.
Mike,
We haven't even considered getting an agent. We figure there is a good chance we are two to three years away from buying based on future price expectation. Are we right in assuming that a buyer's agent probably would not be interested in working with us at the moment?
I love this discussion - so glad that I stopped lurking.
Biliruben - I agree that there is a lot of dodgy new construction, but a lot of the thirty year old houses for sale in Redmond are just thirty year old dodgy construction. The water damage, mold and electrical shorts are there too. I see no homes with nice bones for sale on the Eastside.
Even if the bones are nice, if I have to rip stuff out and replace kitchens and bathrooms to make it comparable to a newer home, then it is worth 100k less right away.
Your comments about thinking Sash was a realtor show an unhealthy bias IMO too. People should be judged on the merit of what they say, not based on what group of people you think they belong too.
Boopda - have you tried www.microsoft.com/careers? This is where you should look. Sending your resume to a random employee has less chance of success IMO.
601-mike - I appreciate your pitch, but what no agent has explained to me yet is what value I get from you that I don't get looking in the MLS myself every couple of days. If something is selling faster than I can find it with this method, then I am going to have a hard time getting a good price. I have a query that comes up empty on cbbain.com every day, so it is not like it is hard to find candidates to buy.
If our market was healthier, and somebody making 100k a year had 100 properties to choose from that all met his needs, then an agent would make more sense to me. But in the last year I have seen less than 5 properties go up for sale that were anywhere near what I could afford and someplace that I wanted to live. I don't need an agent to help find property in this market.
Alan,
You've got two or three years to get more proficient and a good mentor will be a huge benefit. First lesson is that nobody can accurately predict market behavior over a mid-term, especially after the period from which we are just coming out. One of the things I have learned is that real estate was complicated in the 1780s; unbelievable how many wild deals were going on even then. The so-called disrupters, Zillow, Redfin, et al., are much more likely to bleed dry than they are going to unseat Windermere or Re/Max or Coldwell Banker. Your chances of accruing 3%+ gross benefit from going it alone are minimal while your chances of buying a better property and gaining more in the long run are very high provided that you get in synch with a wonderful mentor. Just don't burn out the mentor across the two years.
eastside re shopper,
I've now blogged twice in my life, but I've been in 2100 re transactions. I haven't a clue about turning anything I write here into dollars, so no "pitch". Years back, I worked with a bunch of guys who thought they could do better brain surgery after six week immersions in any "vertical". In real life, it doesn't work that way. Over the past couple years, 75% of the homes I have sold to buyers have been homes on the market for less than six hours. It has been crazy, demanding, and no fun at all! As often as not, the bidding went so high that I urged clients to run away. You have absolutely no benefit in running your own re effort; even if you pull off a miracle, you save yourself what...3%? In real life, listing agents won't often do both sides for just their listing commission...these guys WANT another agent working for the buyer to mitigate the demands on them. So, even if you identify and negotiate for yourself, your chances of saving even 3% are attrociously low. Besides, while you are in your office on your PC, good buyer's agents are inside the houses calling their clients to "drop everything" and meet them.
Mike,
very interesting concept... drop everything and buy a house...
let's see... I leave my job without warning... -- will I still have a job to pay off the exorbitant mortgage..
See the house and on the word of somebody looking for a 3%commission make a decision in 15 minutes, put in an offer with an accelerator clause and hold my breath... that I win the bidding war...
2006 maybe... 2005 definitely...
2007 are you serious?
It's advice like these that caused the market to be so crazy... and yes the last couple years this was true...
But you're a realtor and we should expect this from you....
Now that you're officially a blogger... did you sell any house in 6 hours in 2007?
I'm not really interested in a mentor. I am not interested in real estate as an investment. I do not believe that there is an underlying reason why real estate is a good investment (and historical evidence backs me up -- while there may be 50 year boom/bust cycles over the centuries real estate barely beats inflation -- who knows when the boom of the last 50 years will end).
All I want is a decent place to live without having the sword of rent increases hanging over my head. With any luck, my next home purchase will be my last. I do not even really care about getting a 'good' deal. I would be thrilled to pay a completely average price if the average price were reasonable. In my experience the 'deals' are deals for a reason. I agree that a good agent provides a lot of value to the transaction.
Mike - I fully intend to use an agent when I close on a house. I am not looking to save money with my attitude. I would just rather search the database myself with tools I like.
Even though I am not trying to save that 3%, I don't agree that it is a trivial amount. We are talking $18k on the $600k properties that are selling around here these days. I understand why some people don't want to pay it.
My question still stands to you, and you have not explained to me what the benefit of signing up with you is.
You seem to be saying that your value is that you find out about properties that are only on the market for 6 hours, and I cannot find these properties myself. Are you honestly going to say that a property that does not last on the market for a day is going to be a good deal? If somebody accepts an offer that quickly then it is probably for more than they asked for. I can barely afford the crappy property in this area, so I certainly don't have the money for a bidding war on the good stuff.
I think that real estate agents need to accept that what people want from them is likely to change over time. Even though the MLS is full of crappy data it is trivial for me to keep track of stuff as it comes on the market. I don't need to pay somebody to do that. What I do want is somebody to hold my hand when I pick a place and help me ensure that I don't buy a POS and that I don't get ripped off.
To use an analogy, look at wedding photographers. Most of them want to make money selling prints. Most people getting married want to pay somebody to take their photos and hand over RAW digital images at the end of the day. See the disconnect here? Photographers want to be making money selling stuff, but people want to pay for their time.
Personally, I think that an agent who does a killer job closing deals and does not bother searching for property could do really well even in this market. How much of your valuable training is about searching for houses and how much is about the legalities and technicalities of closing the deal?
I won't be signing up with an agent until the market is healthy again and there is enough selection to warrant it.
eastside re shopper,
I'm not hearing much about which I disagree, with the exception that 3% should be getting you a lot more than a killer negotiator. Negotiations are always situational and the chances aren't great of negotiating numbers way down on a property that is both a good product and priced well. You get some good exposure and education from database searches, getting inside homes, reading copiously on the web. A great Buyer's Agent will save your energy by vetting properties and keeping you away from bad places as much as focusing you on good ones. Within a couple minutes, we know about LP-siding and bad electrical work and galvanized plumbing and asbestos issues and septic system red flags and shoddy do-it-yourself repairs. The web won't tell you about smoking and food and pet odors or failed windows or about street noise that you'll hear in May when the windows are opened again. Most people I see are easily smart enough to be selling homes or doing ten other jobs, but they also understand how their own job experience translates to better results. The main problems that I have with real estate are predicated on low barriers to entry and low product education. We all have to make decisions based upon the available data so the market is what it is. There have been nay-sayers in every market and only looking backwards gives us the answers to market movement. What we can do is to fully expose and understand the products we see and then make informed decisions about them. You don't buy a rambler that is a major fixer and then plan on living in it during the work stages, for instance, when you have two little kids at home and a fifty hour per week job. You don't spend all your resources to close a purchase and then bootstrap a major overhaul using credit cards. These are understandings that simply won't be accrued through information.
601-mike,
Don't take the negative comments to heart. It's our kneejerk reaction to pounce on RE agents and shills. They typically add little more to the conversation than misinformation (aka: lies), cherry-picked statistics on "medium" prices, and spelling and grammar that would make a dyslexic blush.
I, for one, am encouraged by your posts. You pay attention when writing your posts (except about the wild deals in the 1780's, but maybe "wild" is the operative word) and generally post coherent, logical thoughts. You keep a civil and respectful tone. You don't post your information, so you avoid specific hawking of your services. You seem genuinely concerned about your fellow agents' level of expertise and the low requirements for a field that handles the biggest transactions most people will undertake. All of that is very positive and appreciated.
Welcome.
In the '80s,we moved to Seattle from LA's real estate market that had turned to insanity (even then).Regular people were so stretched to make housing DPs and PITI that personal homes were suddenly reconfigured into active investments.Enjoying your house meant tabulating appreciation rather than coming home to relax. In Seattle,everyone working a full day's effort could squeeze into a home.The checkout person at Safeway...homeowner.The server at Ivar's...homeowner.The difference was physically evident from their posture to their faces and attitudes.Nobody was disenfranchized.Three bedroom 1 bath starter homes were $110,000 in Fremont,$80k in Northgate,$55k in Bothell.Banks offering funny money loans were just handing out mortgages in LA and appraisers always seemed to find that magic value to support runaway speculation.
I used to think that the one saving grace from stretching way out of comfort and spending insane money on houses was that lots of extra effort and elbow grease could assure that an industrious person would produce accerlerated equity.
For more than two years,the good fixers that I have seen have been speculated up at purchase price to a level where the future improvement value was taken out at the point of sale.
These buyers seldom identified themselves as speculators,but that's what has been going on...I don't need to tell that to people here.When they succeeded in flipping these houses for profit, their profits were driven not by their efforts but by market movement that was entirely outside their control.
Cannot wait to see fixers coming on the market for what they are and selling for what they should.If you can get into a fixer and make money in a static market through paying yourself for the labor you put in, that's a fair trade.
What Stephen (two above) said. In fact the agent will make you sign a document disclaiming any advice they may have given you about the property. Don't expect them to protect you from getting ripped. I have a hard time believing they would help negotiate a price down as well, considering their commission is based on the price. How does negotiating down help them? The system is broken.
I just bought a new house in Seattle and the looking is quite painful at first, especially if you are surfing Redfin and driving around on your own. Wasting your time looking at overpriced houses that have been poorly remodeled with cheap crap from home depot by amateurs gets frustrating. The earlier statement that nice houses at good prices disappear from the market pretty quickly is really true, you have to be able to go see a new listing as soon as possible, but also be disciplined enough to insist on inspection and a do a reasonable transaction.
So I'm moving to the East side area from St. Louis, Missouri (East side has a totally different meaning in STL :) ) and would like to find a solid (non-POS)2 bedroom condo for around 200k - is that even possible? Should I wait another 12 months before buying and see if the Condo market drops? I'm looking at living in the Kirkland area.
Cheers,
Scott
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