Housing by the Numbers: December 18, 2017

Unchanged

(Via C is for Crank) According to Seattle Department of Transportation, average daily traffic volume barely changed between 2015 (1,019,044) and 2016 (1,019,295) despite population growth of 19,901. However, collision rate increased by 6.3% and fatal/serious collisions increased by 16.5%. 2.6% more pedestrians were run over. Be careful out there!

$100 Million

Mayer Durkin announced investments to build 896 affordable housing units, renovate 535 existing affordable housing units and develop 26 homes for low-income first-time home buyers. The Urbanist points out this more than doubles Seattle Office of Housing’s 2016 budget of $47 million. These projects will be funded by the 2016 housing levy as well as the $29 million affordable housing bond approved by city council last year.

Posted on December 18, 2017 at 1:16 pm
Isabel Wang | Category: Uncategorized

Housing by the Numbers: December 16, 2017

1 in 12

Sooo much interesting data in the 2017 Rental Housing Report from Harvard’s Joint Center for Housing Studies. For instance, 1 in 12 homeowners age 55–64, 1 in 8 owners age 65–74, and 1 in 5 owners age 75+ made own-to-rent transitions between 2005 and 2015. Unfortunately, less than 3% of rental units offer adequate accessibility features (no-step entry, bed/bath on entry level and wide hallways/doorways).

CNBC also reports that between 2009 and 2015, the number of renters aged 55 + rose 28 percent, while those aged 34 or younger only increased 3 percent. Meanwhile, 5 million+ baby boomers are expected to rent their next home by 2020, says Freddie Mac.

43 million

Harvard research also shows that the number of rental households has increased by almost a million a year since 2010. The current 43 million total is 25% higher compared to a decade ago. But there’s been a sharp slowdown in rental household growth. Construction of multifamily rental units, too, has leveled off. After almost quadrupling between 2009 and 2015, activity slowed in 2016 and fell by 9% in 2017. (But not in Seattle.)

Update on 12/19: 5.3% 

In contrast with multifamily rental construction, single-family housing starts leaped to a 10-year-high in November, going from an annualized rate of 883,000 in October to 930,000. But that’s still significantly below the 50-year average of 1.5 million units per year.

Posted on December 16, 2017 at 1:09 pm
Isabel Wang | Category: Uncategorized

Housing by the Numbers: December 13, 2017

$7 Million

The amount of revenue that the City of Seattle expects to raise by taxing short-term rentals. Starting in 2019, hosts on AirBnB and other platforms will be charged $8 per night for renting out a room or $14 for an entire home. Each host will also be limited to operating two short-term rental unit and a permit will be required for each unit. Citing data from AirDNA, the Stranger reports that over 6,500 Seattle homes are currently listed on AirBnB. AirDNA’s data shows that these listings come from 3,748 active hosts, 55% of whom operate multiple properties.

2035

Curbed reports that Mayor Durkin signed off on a plan for bringing Light Rail to Ballard 18 years from now.  According to Sound Transit, the Ballard Extension, connecting Market Street to Downtown Seattle via an elevated guideway through Interbay and a new rail-only bridge across the canal, will have 9 stations.

1,851,000

That’s Redfin’s estimate on the increase in roommate households over the past decade, due to declining affordability. According to census data, 8.33M (6.6%) of households consisted of roommates in 2017, versus 6.479M (5.6%) 10 years ago. Redfin also points out that with both house prices and interest rates on the rise, US homeowners’ monthly principal + interest payments increased 13% in 2017. Redfin expects an even higher increase (15-20%) in 2018.

18.8%

Seattle Time says Seattle’s condo inventory falls far short compared to Boston and Miami, where two-thirds of home available for ownership are condos. In New York and Chicago, the proportions are about half and half. Our condo liability laws are to blame. Looking forward, out of the 75 projects currently under construction, only 3 are condos.

Posted on December 13, 2017 at 11:27 am
Isabel Wang | Category: Uncategorized

9 Things to Know about 2018’s Housing Market

Update on 12/20: The 2-year residency requirement for excluding $250K/$500K of home sale capital gains from taxes was NOT changed in the new legislation. Sigh of relief for new-ish homeowners needing to relocate. On the downside, moving expenses are no longer tax deductible.

The 2018 Housing Market

Posted on December 12, 2017 at 10:43 am
Isabel Wang | Category: Uncategorized

The Dividing Line

Researchers at the National Association of Realtors found that in congressional districts where more than half of homes are worth $500,000+, the average home ownership rate is 48%. In areas where sub-$500,000 homes are more readily available, the average home ownership rate is 65%.

In 2013, 7,740 homes were sold in Seattle. 4,463 (60%) of these houses were purchased for less than $500,000 and 482 (6%) for over $1 million.

Fast forward 5 years and between Jan 1 and Oct 31 of this year, 7,208 homes were sold in Seattle: 1243 (17%) for under $500,000 and 1242 (17%) for over $1 million. Next year, the number of 7-figure homes will surely exceed those available for less than half a million.

The Federal Reserve Bank of St Louis offers this sad depiction of what our dwindling sub-$500,000 housing supply does to home ownership.

Posted on November 20, 2017 at 7:18 pm
Isabel Wang | Category: Uncategorized

When Is the Housing Market’s Black Friday?

Inman says that according to data from Trulia, Black Friday for real estate buyers happens in August, when 13.9% of house prices will be cut. In December, only 8.3% of sellers will have slashed prices. This doesn’t jive with what I’ve seen in the Seattle market.

The chart below compares outcomes for home sales that closed during each of the past 12 months. “Poor outcomes” include listings that sold under asking price and listings that have undergone at least one price drop. “Good outcomes” represent listings that sold at or above asking price.

Since there is typically a ~30 day lag between contract signing and sale closing, it seems October, November and December offer the highest probability for a poor outcome (and therefore a good deal for the buyer).

 

Month Price Drop Under Asking Poor Outcomes Good Outcomes
Nov 2016 25.53% 16.60% 42.13% 57.87%
Dec 2016 28.97% 19% 47.98% 52.02%
Jan 2017 31.04% 19.07% 50.11% 49.89%
Feb 2017 24.75% 12.88% 37.63% 62.37%
Mar 2017 15.86% 10.89% 26.75% 73.25%
Apr 2017 12.21% 8.76% 20.97% 79.03%
May 2017 11.75% 8.75% 20.50% 79.50%
Jun 2017 10.25% 10.01% 20.26% 79.74%
Jul 2017 11.32% 12.79% 24% 76%
Aug 2017 16.32% 14.27% 30.59% 69.41%
Sep 2017 18.17% 14.31% 32.47% 67.53%
Oct 2017 17.33% 15.48% 32.81% 67.19%

 

Posted on November 14, 2017 at 9:32 pm
Isabel Wang | Category: Uncategorized

Coming Soon

If I have your snail mail address, you may get my November update soon. The theme is money in the Seattle housing market. While taking one last look before sending it to the printer, I couldn’t help noticing that the 11.46% annualized return offered by Pyatt Broadmark (in the “flippers” column below) is much higher than the average home sales ROI (65% over a 10.2-year average holding period). According to the Seattle Times, that’s the highest profit in the US next to San Francisco and San Jose.

Of course “average” does not describe everyone’s experience. 10.2 years ago, the housing market was awful. Many sellers who bought their homes in more recent years enjoyed far higher returns within much shorter time frames. But as Pyatt Broadmark says in their prospectus, past performance doesn’t guarantee future ROI, “which may be affected by changes in market or economic conditions and in legal, regulatory and tax requirements”. So it is with house purchases.

For instance, both the House and Senate have proposed lengthening the residency requirement from 2 out of 5 years to 5 out of 8 before the first $250,000 ($500,000 for couples) of home sale profits are tax exempt. The Wall Street Journal suggests that “affected home sellers should complete sales before year-end.” As if it were that easy!

 

Posted on November 11, 2017 at 11:36 am
Isabel Wang | Category: Uncategorized

“This Effectively Becomes a Tax on Selling a Home”

Long time real estate analyst Mark Hanson points out that rising insurance costs dramatically reduce home-buying capacity. A family friend of his received notice of a $587 health insurance premium spike, which means a $120,000 drop in mortgage-paying ability.

The proposed $500,000 cap on mortgage interest deductions has the same effect on anyone buying a home after last Thursday. Wall Street responded with an immediate sell-off of home builders’ stocks. Harvard economist Edward Glaeser told the New York Times that “this effectively becomes a tax on selling a home”.

And speaking to KOMO, mortgage loan officer Duane Stenson points out that increasing property taxes, even by a few dollars, could impact home buying.

Inevitable upcoming interest rate hikes will also make homes harder to sell. Every 1% interest rate increase leads to a 10% reduction in purchasing power. As research by Harvard’s Joint Center for Housing Studies shows, even a slight rate change can have a noticeable effect on mortgage borrowing.

And not so great rental yields, along with regulations such as this year’s first-in-time ordinance, may dampen investor interest.

Sometimes, during our office Tour Days (every Monday and Thursday!), when my colleagues and I scope out all the for-sale homes in the area, I kick myself for not having bought an investment house last year or the year before. How prices have gone up! But in the face of all these real and potential obstacles to liquidity, what I regret much more is not putting more money into Amazon stocks. It’s gone up 44x since I bought 10 shares for my 1990s 401(k).

Posted on November 5, 2017 at 9:32 am
Isabel Wang | Category: Uncategorized

Random Things: Nov 4 Edition

I’m catching up on my reading list. Here are a few things I came across:

1. Powerpoint was created by Robert Gaskins and Dennis Austin, both former Apple marketing managers. The first month after its 1987 launch, it booked $1 million in sales. Two months later, Microsoft bought their company for $14 million. (via Boing Boing)

2. Thanksgiving-flavored ice cream is a thing. Options include Butter Mashed Potatoes & Gravy and Salted Caramel Turkey. (via Los Angeles Magazine)

3. Crown Hill Hardware, where I often shopped, has been in business for 100+ years. Super sad that it’s closing. (via MyBallard)

4. According to research by Jones Lang LaSalle (my first post college employer!), apartments in Seattle have shrunken from an average size of 896 square feet in 2002 to just 635 square feet today. Greenlake/Wallingford apartments are the tiniest, averaging just 569 square feet. (via Curbed)

5. In the event of a nuclear apocalypse, Seattle is one of the worst places to be. Your safest bet is the southeast side of Kansas City. (via Realtor.com)

6. New York Times says we have too many restaurants: 620,000 in the US. And Restaurant count is outpacing population growth by 2 to 1. Even though we are spending 44% of our food budget on eating out, there still isn’t enough money to sustain all the eateries. (Which is why Starbucks has reported weaker-than-expected same-store sales for 3 quarters in a row.) This bodes ill for employment, as restaurants account for 1 out of every 7 new jobs since 2010.

7. Reese’s Peanut Butter Cup is the best Halloween candy, winning 84.2% of the time in randomly generated match-ups against sugary competitors. FiveThirtyEight did some super fun statistical analysis.

Posted on November 4, 2017 at 7:22 pm
Isabel Wang | Category: Uncategorized

Good Deals in Real Estate

In this Forbes article, 2 out of 8 experts defined “good deals in real estate” as properties that fetch monthly rents in excess of 1% of their sale prices.

I took a quick glance at rental listings near my office and found a lovely 2,000+ SF house in Mount Baker with 3 beds, 2 baths and a newly renovated kitchen. The landlord is asking $4,500. A slightly worn-looking Mid-Century on Seaward Park Ave is renting for $2,750. Down by 46th & Holden, you get nearly 2,700 SF plus a lovely yard for under $2,500.

If you multiply these asking rents by 100 and go looking for reasonably move-in-ready 3-bedroom houses in the neighborhood? Good luck!

On the flip side, if Forbes’ experts are to be believed, it seems Seattleites selling their houses these days are getting spectacular deals.

Posted on October 29, 2017 at 6:29 pm
Isabel Wang | Category: Uncategorized

Categories