My View of the Market • February 29, 2024

My View of the Market – February 2024

by Josh Friend

Remember way back last month when Fed Chair, Jerome Powell, shared that it is likely that the Fed will cut rates up to 3 times in 2024? Do you remember how excited I was at this news? Well…that was so…January.

Here in February everything has changed. I’m not saying rates won’t drop at all. But how often, how much and when are now all in question. I suspect it will be much later than expected if and when they do.

What happened? Couple of things. That stubborn inflation inched back up rather than continuing it’s downward trajectory. Then there was the jobs report stating that were 335,000 newly created jobs in January. Jerome Powell and the Fed put those two factors together and put the brakes on any idea of lowering rates. Yes, rates still change almost daily, but we are now in a wait-and-see mode before we’ll see any significant cuts.

What does this mean for sellers? Conventional wisdom says it will adversely affect the numbers of buyers and the potential for escalation addendums this spring. However, there is still almost no inventory. In fact, turnkey homes are selling quickly with multiple offers on appropriately priced homes. So, if your house is move-in ready, you are in a great position to quickly get a great price.

For buyers, because of the continued inventory draught, they will have to continue to make concessions on what they consider to be their ideal home. This is not unlike when rates were lower, except back then they had to settle for less of a home because of competition and bidding wars. Now they still have to make concessions on price, this time because higher interest rates are constraining what they can afford.

Some good news for buyers: Several home inspectors I work with have been very busy in the last couple of weeks and are booked out for several more. This tells me there will be an increase in inventory in the coming weeks and months. Be ready with your loan pre-approval. Inventory is coming.

My View of the Market • Uncategorized • January 19, 2024

My View of the Market – January 2024

by Josh Friend

Some of you may have taken a break from your holiday merriment and paid attention to the latest Federal Reserve meeting in December. You didn’t? Well, I did for you. So, for those of you that have been too busy, here is a brief recap of the pertinent information.

Fed Chair, Jerome Powell, shared some great news that the Fed is not planning to raise rates for the foreseeable future thanks to the easing of inflation. In fact, not a single Fed official believes that there is a need for any future rate hikes. This indicates that borrowing costs have already peaked (imagine my giant WOO HOO! here).

Even better, Powell said that it is likely that they will cut rates up to 3 times in the next year. Music to our ears! So, with that fantastic news, how will it impact our local real estate market?

The fun is just getting started, as starving mortgage lenders are salivating to get out in front of their competitors and gobble up market share. Many are gambling that short term losses with increased market share will make them winners as lower anticipated rates materialize. I can feel rates lowering as I type this.

Think about this. September mortgage rates were as high as 8%. You’ll remember my commentary from last month. In the fall, our real estate market virtually fell off a cliff. Now, rates are in the mid-6’s. Far more palatable for buyers. And, like I said, lenders are hungry. One company I know is offering rates as low as 6 1/8%! Did that perk you up? Call or email me and I’ll get you connected.

From my view, the immediate future is predictable. As rates drop, more buyers start shopping. More buyers means more competition. All the while, inventory is still low because would-be sellers are desperately hanging on to their bargain mortgage rates. Fun fact. Did you know over 90% of the mortgage loans in the US have rates less than 6%? Death, divorce, and relocation are still the primary reasons for most homeowners to sell. That could change this spring/summer as sellers have been holding off, but that has not been the case in the past few years.

My prediction is that spring promises to see rising home prices and potential for bidding wars.

Buyers • Sellers • Uncategorized • January 19, 2024

“Josh, When is the right time to buy or sell?”

by Josh Friend

It’s not even close. The question I get most often is “when should I buy or sell?” Get out your crystal ball, Josh. You and everybody wants to know when the peaks and valleys are going to hit. OK. Here are my thoughts for this spring market.

Buyers:
Listen up. Buy as soon as possible. This may sound self-serving, but if you read #1 above, you’ll know you are on the cusp of the pricing bell curve rising again. The clock is ticking. The next rate improvement is likely in January or March at the latest. When (not if) that happens, there will be an influx of buyers in an already tightly inventoried market. So, I’m telling you right now, prices WILL go up as the year progresses.

But Josh, you say, interest rates are supposed to go down this year. Shouldn’t I wait to buy? To that I say “no.” Hear me out. Yes. Your rate will be higher now than in 6 months. But studies (and the math) show that buying with a higher interest rate at a lower price point is much more cost effective because you can refinance into a lower rate later.

This strategy really works. But make sure you understand it before you sign on the dotted line. You could buy down your rate, but I would tell you not to spend the money. It doesn’t pencil out in most cases.

Bottom line, don’t wait. It only takes a day or two to get pre-qualified if you are organized and diligent. Waiting will cost you money.

Sellers:
Have you been holding out waiting for rates to drop? Do you sense that tsunami of buyers about to hit the market when they do? You need to position yourself to be ready to list your house. That means putting a plan in place yesterday (well, ok, now).

The spring sales market is going to be hot. You’ll likely gain an upper hand in negotiations as the spring/year progresses. But then you have to stop and think. How long will the seller’s market last? Remember the cliff last fall? Will it happen again?

My crystal ball is a bit cloudy on this one. My gut tells me you’ll be able to get the most for your home if you sell before everyone goes on vacation for the summer. It’s not just me, other agents I have spoken with believe that we could see a drop in buyers towards the end of summer causing prices to plateau which could lead to more days on market..

On the flip side, if you look at the economics of it, our local unemployment is currently at 3.7%. People are employed and making money. That means they need homes. And low inventory has been pervasive for years. Will we hit a cliff again? If interest rates really don’t inch back up, which most don’t think they will, I believe there will still be more buyers than we have inventory – which is always good for sellers.

So, ask me again. When should I buy or sell? At this point in time (which I have not always recommended) the answer is now! Call me and let’s put a plan in place! Or reach out even to poke holes in my logic. I love a good debate!

My View of the Market • Uncategorized • December 21, 2023

My View of the Market – December 2023

by Josh Friend

What will we remember about 2023? Well, the media was intent on telling everyone the real estate sky was falling. Story after story of housing bubbles on the verge of bursting and high interest rates boxing buyers out of the market.

I won’t remember it that way. In reality, at least last spring, this year was not much different than the year before. In fact, homes that were listed for $1,500,000 or less sold quite quickly in the first half of the year.

The luxury side, however, saw the biggest decrease in home sales. Homes valued over 2 million dollars tended to sit on the market much longer only to be de-listed when they didn’t sell. That said, some luxury homes sold in mere days after listing. What set those homes apart? Honestly, there was no clear indication in my mind as to why certain homes sold and others didn’t.

And early in the year, buyers actually had the unusual opportunity to be choosy. They could take their time and look for the perfect location, layout, and finishes. My buyers considered that a luxury given the frenzy of years’ past.

Ah, but then Labor Day hit along with 8% interest rates. Not gonna lie, the market fell off a cliff at that point. But I see no reason to panic. My crystal ball says next year looks to be a very promising year. More on this in early January. Stay tuned.

Client Story • Sellers • Uncategorized • December 18, 2023

In a difficult market, experience matters more than ever

by Josh Friend

As I write this, I am hoping that my Puyallup Valley listing finally closes today. It has been a saga over the past many weeks to the point that the buyers, sellers, and both agents (me and the buyer’s agent) are almost at the end of our ropes. We have actually agreed that if the deal doesn’t close this time, we will all walk away. At least that was the opinion of everyone yesterday. Here’s how we got to this point of frustration.

The Backstory

In August 2023, I listed a beautiful, gated home with sweeping views of the Puyallup Valley. It was near transit, commerce and had incredible spaces for entertaining. A dream. I did the competitive research and we arrived at a list price that I was sure would quickly land us a buyer.

But, as it has been all year in 2023, what worked in the past may not work at any given moment in time. Maybe because it was summer? Maybe being located so far south? I wracked my brain for what I had missed because we weren’t getting any interest. And this house was gorgeous and fairly priced given the comparables. I was stymied.

We laid low for a few weeks and tried marketing again in mid September. By early October, we had a hit. It was a contingent offer and the original closing was set for Halloween. But then things went sideways. The would-be buyer, thinking that since they were under contract for a new home and assuming their house would sell, stopped making payments on their house! They didn’t talk to their agent or their lender…they just stopped paying their mortgage. This created a massive ripple effect for their ability to sell their existing home and purchase the Puyallup Valley home.

Over the ensuing many weeks, we had to draft and approve 3 extensions to keep the deal alive to keep their lender satisfied. On the second extension, I recommended to my clients that we ask for a non-refundable release of the earnest money as a way for the buyers to show a commitment to close. The buyer’s agent liked it so much, that she required her buyers to do the same. That kept the deal together for two more weeks until the next closing date. When the buyer’s of the contingent house had their credit score drop due to lack of mortgage payment’s on their existing home, they couldn’t close. Our buyer’s agent found them another loan. That loan would take another 12-14 days and a third extension. We required our buyers to pay a friendly penalty fee of $3,000 to cover their expenses (mortgage, utilities, and taxes).

On the 2nd one, the lender required more earnest money. By the 3rd, the buyers had to pay a non-refundable deposit assessed as a penalty.

All of the errors on the contingent buyer’s closing were due to mistakes made by the buyer and their lender. What ultimately saved the Puyallup deal was that their buyer’s agent was amazing. Together we got creative and somehow kept it from falling apart. It took 7 weeks post offer to close on this house. Yes, the market is wonky these days, but even today, 7 weeks is egregious. Until I received definitive word that the deal was done, I still feared more delays – or a total collapse.

The Bottom Line – Good News! We closed! But lessons learned

The bottom line is, who you work with is important. Experience matters. Communication between all parties is critical. Yes, delays and complications will crop up – that’s life – but if you have a good team working with you, hopefully those challenges will be more manageable and shorter in duration. At the end of the day because they and the buyer had committed, knowledgeable agents, my clients ended up with a sale. It took much longer than expected (5-6 weeks to get a contract, then 7 weeks to close), but they have happily moved on to their new dream.

Are you looking to make a move? Of course, I would love to be your agent. I truly believe in my team’s ability to get you the most value for your home with the smoothest process possible. But, whomever you hire, make sure they have the knowledge and experience to handle the bumps in the road. Otherwise you could be leaving money on the table, or find yourself with no deal at all.

My View of the Market • Uncategorized • October 10, 2023

My View of the Market – October 2023

by Josh Friend

There’s no denying home sales/transactions in the Northwest are down from a year ago. Inventory remains doggedly low. So, while prices year-over-year remain lower, they are up 4% year to date. In most cases, we still have more buyers than sellers. For seller’s this remains a good thing. Days on market for the majority of homes is still under 30 days. Nearly 60% of homes were sold at or above asking.

The luxury market is an outlier. There actually seems to be expanded inventory in this space. That’s not to say homes aren’t selling quickly, you just have to be smart about it. Homes priced between $1.5-2M are selling quickly if they are updated and move-in ready.

There is more demand for homes below $1.5M. These homes have been selling as fast as they can get on the market.

Bottom line. Interest rates and inventory will continue to dominate the headlines for the next few months. I’m always an optimist, so I see a robust early spring market in 2024. If you’re looking to buy or sell in the next 6 months, now is the time to make a plan.

Housing Market • Uncategorized • October 10, 2023

5 Reasons the housing market won’t crash

by Josh Friend

…despite the doom and gloom being reported everyday.

There still isn’t enough inventory to meet current demand. Most would-be sellers are loathe to part with 3-4% mortgage rates. Who can blame them? It seems as though 75% of the listing market is due to relocation, death, or divorce.
Builders have slowed down their production. There are a number of reasons for this. I will expand on this topic next month for those people considering investment properties
A new class of buyers are buoying the market. Millennials and Hispanics are leading the charge for the first-time home buyers.
Lending standards are much stricter than they were 15 years ago. You’ll recall that was the impetus for the crash in 2008. The money isn’t nearly as free flowing in 2023. Those who have bought are more qualified buyers than ever before.
With the market increases over the last 5 years, homeowners have more equity in their homes than ever before. This trend continues. In 2023 home prices have increased by 4% from the beginning of the year until now.

My View of the Market • Uncategorized • June 27, 2023

My View of the Market – June 2023

by Josh Friend

Well, there have been newsletters in the past where I feel like I have been repeating myself, but not in this market. Conditions over the last 6 months have been changing rapidly. For example, we had a very strong seller’s market in March and it held through May. Much of this is related to interest rates dropping down into the 6% range. Then, in early May rates dropped again, but as the month wore on they began climbing. And so here is where we are. Rates are now fluctuating almost daily with rates back in the 6-7% range. This has cooled the market slightly.

Some homes are making it through to review dates (usually on Mondays or Tuesdays) with solid offers. True, homes are still selling, but now buyers can wait to see if multiple offers are coming in to determine if they they are facing an over-asking bidding war.

So, what does this mean for you? Buyers: write a contract that is closer to the asking price and in some cases slightly below. Sellers: price your homes at current market value and not plan on escalation addendums to increase the price of your home. Adjust your expectations! This isn’t 2021 anymore! Your home will likely spend more days on the market to go under contract.

The good news is, many forecasters are predicting lower rates in the coming months. And while inventory remains low, falling rates typically give way to higher prices and multiple offer situations. Buyers shouldn’t wait. There are plenty of adjustable rate mortgage options out there that will allow you to jump to a lower rate quickly. Sellers shouldn’t wait either. If you know you are planning to sell, start preparing your home to list because there still aren’t enough homes on the market to meet demand.

Buyers • Sellers • Uncategorized • June 2, 2023

What is a Balanced Market?

by Josh Friend

The common real estate industry’s definition considers the market balanced if it takes 6 months for all inventory to be bought up with no new homes coming on the market. Common yes. PNW no. We just have too many buyers than sellers. The last time we truly had a balanced market in our area was just after the recession of ’08. A common timeframe for days-on-the-market in our area is 22-28 days, not even close to six months. So, as a seasoned Realtor in the great northwest, whatever the timeframe, I consider a balanced market to be when we have as many buyers as we do sellers. And trust me, this does not happen very often. We did see it last June and this year in January and February, but then it quickly reverted back to a seller’s market as more buyers than new listings hit the market.

So will we see a balanced market again (my definition, not the industry standard)? Maybe. If interest rates were to remain in the 7% range for a few months it is likely things will start to balance out. But, as soon as the rates drop back down into the sixes, we’ll steadily push back into a typical PNW seller’s market.

My View of the Market • Uncategorized • April 28, 2023

My View of the Market – April 2023

by Josh Friend

Don’t believe the gloom and doom. It is still a seller’s market. While January and early February saw an approximate equal number of buyers and sellers, there are currently more buyers than sellers. The lack of inventory persists. Last month, I predicted that the heat of the traditional spring market would be delayed by a month due to economic conditions. I was right. Things are now heating up. As we end the month of April, my sellers are seeing multiple offers and over-asking prices. I still believe the May 10^th core CPI report will help lower rates and bring even more buyers to the market. Which means sellers again have the advantage.

For Sellers

It’s a great time to sell. Contact me and let’s talk about how to prep your home for sale. Don’t wait. It can take a few weeks to get your home list-ready. I’ll pay for the home inspection and then help to remedy anything that needs to be dealt with. In my experience, most items can be done for very little money out of pocket.

For Buyers

My advice for buyers? Buy soon. I know this sounds like a sales pitch, but that’s not my style. Despite what you read in the media, prices have already risen over 7% in March from the beginning of the year. April has shown over-asking prices and bidding wars to once again be commonplace. This will only ramp up as rates start coming down in May. With prices rising and rates dropping, you don’t need a crystal ball to tell you that the longer you wait the more expensive your next home will be. If you’re worried you’ll lock in a higher interest rate, I can direct you to companies that will allow you to REFI for free in the first year of your loan. The mortgage industry is begging for your business. There are even down payment assistance programs for first time buyers. Call me and let’s talk about how we can get you into a new home this spring before the market overheats again.

I’m here to help! Call me!