Why Buying Beats Renting Today

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Buying a home in the Puget Sound area beats renting in less than two years, according to a new study. The “breakeven horizon” – the number of years after which buying is more financially advantageous than renting – is 1.9 years.

Why the short timeframe?

Interest rates are at historic lows. (But experts expect them to rise soon.)

Interest rates

Rents are at record highs.

Zillow Rent Index

If you paid the average cost of monthly rent towards a mortgage payment instead, here’s what you could buy:
Based on principal & interest on a 30 year mortgage at 4% interest with 0% down.

 

Are you ready to invest the money you spend on rent to buy a home?

Get in touch with me so I can help you take advantage of the “breakeven horizon” and turn your monthly rent into a mortgage payment.

Windermere Foundation Infographic

If you’ve bought or sold a home with me through Windermere Real Estate, you’re a part of the Windermere Foundation, and you’ve helped make a positive difference in the lives of your neighbors in need. The following infographic shows the types of services funded by the Windermere Foundation, and illustrates how even a small amount can make a big difference for low-income and homeless children and their families.

The Windermere Foundation had a goal to reach $30 million in total donations by the end of 2015. Thanks to the generosity of Windermere owners, agents, staff, and our community partners, we reached that goal three months early! Because of this we were able to fulfill 636 grants and help 409 organizations that provide goods and services to those in need in our communities.

If you’d like to help support programs in your community, please click here.

To learn more about the Windermere Foundation, visit http://www.windermere.com/foundation.

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This blog was originally posted on the Windermere Blog.

Local Market Update – March 2016

A severe lack of inventory has led home prices to reach an all-time high. With the supply of properties at its lowest level since 2003, the market is in dire need of more homes to meet buyer demand. That is excellent news for those thinking about selling their home. Sellers can expect a quick sale, favorable terms and a historically high sale price. Buyers will need patience and a strategy for competing with multiple offers.

Eastside

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The Eastside, already the most expensive area in King County, saw home prices set a new record in February. The median price soared 20 percent over last year to $739,975. Inventory here is particularly tight, and the area remains a very strong market for sellers. Homes are selling quickly, even at the higher end. A $3.2 million home in Yarrow Point sold last month in just 14 days.

King County

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The median price of a single-family home sold in February hit an all-time high of $514,975, a whopping 20 percent increase over the same time last year. The number of homes sold exceeded the number that were listed, depleting inventory at a rate that is unsustainable. For the market to remain healthy, more people need to make the decision to list their homes.

Seattle

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The continued boom in tech company hiring helped propel home prices to peak levels in Seattle. The median price of a single-family home jumped 24 percent over a year ago to $644,950, a new high. Inventory is at critical levels. In the hot Ballard neighborhood there are currently only 17 homes on the market.

The Tax Benefits Every Homeowner Should Know About

This article originally appeared in Times of San Diego 

The housing market on the West Coast is predominantly very strong and more and more people are becoming homeowners. While there are many intangible benefits to owning a home, such as pride of ownership and setting down roots in the neighborhood, the tangible benefits are just as great. In addition to benefitting from possible appreciation, there are many tax deductions available that help reduce your annual income taxes.

Tax breaks are available for any type of home — single-family residence, town house, mobile home, or condominium. However, to take full tax advantage of owning a home, property owners need to understand the expenses they can deduct, and learn some tips to get the most tax advantages out of home ownership.

Mortgage Interest

A house payment is comprised of two parts: principal and interest. The principal goes toward reducing the amount you owe on your loan and is not deductible. However, the interest you pay is deductible as an itemized expense on your tax return. You can generally deduct interest on the first $1 million of your mortgage. You can also deduct interest on the first $100,000 of a home equity loan.

Property Taxes

Another big part of most monthly loan payments is taxes, which go into an escrow account for payment when the taxes are due. This amount should be included on the annual statement homeowners get from their lenders, along with their loan interest information. These taxes will be an annual deduction as long as the home is owned.

Home Improvements

If using a home equity loan or other loan secured by a home to finance home improvements, these loans will qualify for the same mortgage interest deductions as the main mortgage. Only the interest associated with the first $100,000 is deductible.Making improvements on a home can help you reduce your taxes in two possible ways:

  • Tracking home improvements can help when the time comes to sell. If a home sells for more than it was purchased for, that extra money is considered taxable income. You are allowed to add capital improvements to the cost/tax basis of your home. If a home sells for more than it was purchased for plus any capital improvements, that extra money is considered taxable income. Keep in mind that most taxpayers are exempted from paying taxes on the first $250,000 (for single filers) and $500,000 (for joint filers) of gains.

Home Office Deduction

If a homeowner works from home, they can take a deduction for the room or space used as an office. This includes working from a garage, as well as a typical office space.

This deduction can include expenses like mortgage interest, insurance, utilities, and repairs, and is calculated based on “the percentage of your home devoted to your business activities,” according to the IRS.

Home Energy Tax Credits

For homeowners looking to make their home a little greener, the Residential Energy Efficient Property Credit can help offset the cost of energy efficiency improvements.  People who install solar panels most commonly take advantage of this credit. Homeowners can save up to 30 percent of the total cost of installing certain renewable energy sources in their home. Even better, this is a credit, which means it directly lowers a homeowner’s tax bill.

Of course, every homeowner’s financial situation is different, so please consult with a tax professional regarding your individual tax liability.

Chad Basinger is a real estate agent in San Diego with Windermere Homes & Estates. He has held his CPA license since 1994, has his CFP Certificate, and has been a licensed Realtor since 2007.

Local Market Update – February 2016

Record low inventory has placed the area in an extreme seller’s market. 70 percent of homes sell in the first 30 days. With 30 percent less inventory than a year ago, multiple offers are all but guaranteed. If you’re selling, you can name your terms. For those looking to buy, it’s critical to work with a broker to arrange for financing, and create a strategy for escalation clauses and back-up offers.

Eastside

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Click image to view full report.

 

The supply of homes on the Eastside has reached a critical point with just one month of available inventory. To put that in perspective, there are currently fewer than 100 single family homes on the market in the City of Bellevue. And 80 percent of those listings are priced above the Eastside median sale price of $697,500. With the median price of a single family home sold in January up 12 percent over a year ago, sellers can count on making excellent gains if they decide to list their home.

King County

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Click image to view full report.

Strong population growth fueled by the area’s healthy job market continues to starve the region’s already limited inventory of homes. Depleted inventory resulted in sales that were down nearly 15 percent compared to last January. Not surprising, since inventory was down more than 31 percent. Limited supply pushed single family home prices up 11 percent over a year ago to $490,970. Those shopping for a relative bargain searched outside the city core. The median home price in Southwest King County was $304,103. The median price in Southeast King County was $350,000.

Seattle

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Click image to view full report.

After hitting all-time highs in the past few months, home prices here reached a new peak. The median sale price of a single family home in Seattle rose to $618,450 in January, a whopping 20 percent increase over a year ago. Inventory is razor thin. The Ballard neighborhood has just 20 homes currently for sale. Sellers are solidly in the driver’s seat, and have the luxury of choosing from multiple offers and being able to drive terms to their advantage, whether it’s closing time, amount of earnest money, or other concessions.

The Gardner Report – Fourth Quarter 2015

ECONOMIC OVERVIEW

The Washington State economy has added almost 370,000 jobs since the lowest point of the recession at the start of 2010. Additionally, total employment is 176,000 jobs higher than seen at the 2008 peak. With a vast majority of our metropolitan areas having fully recovered from the job losses seen during the recession, I expect to see somewhat more modest job growth in the coming year. That being said, our economy will continue to expand, which will be a benefit to our region’s housing market.

 

HOME SALES ACTIVITY

  • There were 16,895 home sales during the fourth quarter of 2015, up by 4.6% from the same period in 2014. Sales activity is starting to slow somewhat but this is due to inventory constraints.
  • The growth in sales was most pronounced in Cowlitz and Lewis Counties and double-digit growth was also seen in Thurston County. Sales declines were seen in Grays Harbor County and Skagit County, but only minimally.
  • The number of home sales grew in all but two counties, with the average number of sales up by almost 6% from the same period in 2014.
  • I am not surprised to see some decline in sales start to appear. Listing activity was down by 28% compared to the fourth quarter of 2014, and there were no counties where there were more homes for sale in Q4-2015 versus Q4-2014.

 

HOME PRICES

  • Prices in the region rose by an average of 9.3% on a year-over-year basis but were
  • 0.4% lower than seen in the third quarter of 2015.
  • Unsurprisingly, no counties saw a drop in average home prices compared to fourth quarter last year.
  • When compared to the fourth quarter of 2014, San Juan County again saw the fastest price growth with an increase of 37.6%. However, this county is notorious for extreme swings given the huge variations in prices in the San Juan Islands. Double-digit percentage gains were also seen in five other counties.
  • As long as inventory constraints persist, it is likely that price growth will continue.
  • That said, modest increases in interest rates, in combination with declining affordability conditions in several markets, will likely slow price appreciation.

 

DAYS ON MARKET

  • The average number of days it took to sell a home dropped by nine days when compared to the third quarter of 2014.
  • It took an average of 78 days to sell a home in the fourth quarter of this year—down from the 91 days it took to sell a home in fourth quarter of last year.
  • There were just two markets where the length of time it took to sell a home did rise, but the increases were minimal. Jefferson County saw an increase of eight days while Mason County rose by two days.
  • King County remains the only market where it takes less than a month to sell a home.

 

CONCLUSIONS

This speedometer reflects the state of the region’s housing market using housing inventory, price gains, sales velocities, interest rates, and larger economics factors. For the fourth quarter of 2015, I have left the needle at the same position as the previous quarter. In as much as the market is still very heavily in favor of sellers, I fear that some markets are reaching price points that will test affordability. Furthermore, while inventory levels are likely to see some growth in 2016, it will not be enough to satisfy demand, adding further upward pressure to prices.

 

Overall, 2015 was a stellar year with sales volumes and home prices moving higher across the board. In 2016, I believe we’ll see some growth in sales activity, as well as continued price growth – just at more modest levels than last year. Interest rates are going to rise moderately through the year, but still remain very competitive when compared to historic averages. In other words, any increase in interest rates should not be a major obstacle for home buyers.

Looking forward, I believe 2016 will be a year of few surprises. Because it is an election year, I do not expect to see any significant governmental moves that would have a major impact on the U.S. economy or the housing market.

 

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K. 

2016 Housing Forecast: “Very Strong” for Sellers

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According to a recent REALTORS® Confidence Index Survey Report, 2016 is projected to be a very strong market for local area sellers.

With inventory at historic lows, prices at or near record highs, and multiple offers the norm, it’s an exceptional time to get top dollar for your home.

Washington is one of only three states in the country projecting a “very strong” market for single family home sales.

Single family Forecast

The market for townhomes and condominiums here is also expected to be strong.

townhome forecast

condo forecast

2016 Economic & Housing Forecast

The National Economic Forecast

1. The U.S. will continue to expand with real GDP growth of 2.3% in 2016.

Although a positive number, the forecasted rate of growth suggests that we will be modestly underperforming in 2016.  On a positive note, oil prices are likely to remain well below long-term averages, which puts more money into consumers’ pockets in terms of disposable incomes.  However, I believe that consumers are likely to continue to save rather than spend which will constrain growth.  That said, there is certainly no recession on the horizon – at least not yet – and a strong dollar will act as a bit of an anchor.

2. Employment will continue to expand but the rate of growth will slow. Look for an increase of 1.6% in 2016.

We are rapidly approaching full employment (generally considered to be when the unemployment rate drops below 5 percent).  As such, growth in employment has to be driven more by population growth rather than a return to employment. 2015 saw an average of around 210,000 jobs created per month and I believe that this is likely to slow to an average monthly gain of 190,000 new jobs.

3. The U.S. unemployment rate will continue to drop and end 2016 at 4.8%.

As mentioned above, we are heading toward full employment and, as such, the national unemployment rate cannot trend much lower.  That said, the less acknowledged U-6 rate (which includes those working part-time and those marginally attached to the workforce) will remain elevated at around 8%, signifying that there is still some slack in the economy and room for the rate to drop a little further.

4. Inflation will remain in check with the Consumer Price Index at 1.9%.

The Federal Reserve has begun the long-awaited tightening of monetary policy and we will likely see the Fed Funds Rate continue to move higher over the next two years. Inflation has yet to respond to the low unemployment rate, but it will.

The core rate of inflation should remain in check and the overall rate could stay below long-term averages as a function of stubbornly low energy costs. Should we see a shift in OPEC’s position relative to oil supply, the overall rate of inflation could rise more rapidly.  Oil prices, therefore, will remain in focus during 2016.

The National Housing Market Forecast

5. Mortgage rates will rise, but we will still end 2016 with the average 30-year fixed rate below 5%.

I am taking the Fed at its word when it says that monetary tightening in 2016 will be gradual and heavily data dependent. Accordingly, I expect only a modest uptick in long-term rates in 2016. Furthermore, as long as the Federal Reserve continues to reinvest the dividends that it is receiving from their bond holdings – which is highly likely – the yield on the key 10-year treasury will remain low and hold mortgage rates in check. This is only likely to change after the general election, therefore suggesting that rates will remain very attractive relative to their long-term averages.

6. Credit Quality – which had been remarkably stringent – will relax a little.

Access to credit, specifically mortgage instruments, has not been easy for many would-be homebuyers but that is set to change. I believe that we will see some improvement, specifically for borrowers with “near-prime” credit. This will be of some assistance to first-time buyers; however, credit quality will still be higher than it needs to be.

7. Existing home sales will rise modestly to an annual rate of 5.53 million units with existing home prices up by 4.7%.

I anticipate that we will see some improvement in overall transactional velocities in 2016, but unfortunately, demand will still exceed supply. Prices will continue to rise, but at a more constrained pace than seen over the past few years. This will be a function of modestly rising interest rates as well as slightly improving levels of inventory. I anticipate that we will see more listings come online as more households return to positions of positive equity in their homes.

8. New home sales will jump and be one of the biggest stories for 2016.  Look for a 23% increase in sales and prices rising by 3.4%.

I believe that builders will start to build to the entry-level buyer, filling a huge void.  Additionally, I see the total number of new home starts increase quite dramatically in 2016 as banks start to ease lending and builders start to believe that the downward trend in homeownership has come to an end.  This will help to absorb some of the pent-up demand currently in the market.

9. Foreclosures will continue to trend down to “pre-bubble” averages.

Any story regarding foreclosures will be a non-story as the rate will continue to trend down toward historic averages. However, we will see the occasional uptick as banks work their way through their existing inventory of foreclosed homes. Move along.  There’s nothing to see here.

10. The Millennials will start to enter the market.

There are several substantial reasons to expect an increase in Millennial buyers. Firstly, early Millennials are getting older and starting to settle down, and even with modestly higher mortgage rates, rents are likely to continue to trend upward, and this will pull many into homeownership.

Secondly, more favorable mortgage insurance premiums, additional supply from downsizing boomers, and growing confidence in the housing market will lead to palpable growth in demand from this important – and substantial – demographic.

To conclude, it appears to me that 2016 will be a year of few surprises – at least until the general election! Because it is an election year, I do not expect to see any significant governmental moves that would have major impacts on the U.S. economy or the housing market.

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Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K. 

Local Market Update – January 2016

2015 closed out the year with home prices hitting new highs, and inventory hitting new lows. The market is tough for buyers who are competing for a dwindling number of homes, but it’s also the greatest seller’s market in recent memory. What’s in store for 2016? Here is what Windermere Chief Economist Matthew Gardner forecasts.

Eastside

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Home prices on the Eastside continued to climb. The Eastside extended its lead as the most expensive market in King County, posting a median home price of $675,000 in December. A strong technology sector here has helped boost demand for a very limited supply of properties. Competition among buyers is fierce at every price point, including luxury homes. Multiple offers are the norm, and cash sales are common. For buyers, a savvy broker can make the difference between an accepted offer or another disappointment.

King County

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King County achieved two milestones in December. The number of homes on the market hit a historic low – the smallest number of active listings since at least 1993. And the median price for a single-family home hit an all-time high of $508,000, surpassing the previous high of $481,000 set in 2007. Those wanting to buy in King County can find more affordable options by heading south. The median home price in Southwest King County was $305,000. The median price in Southeast King County was $349,950.

Seattle

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The hot market in Seattle just keeps getting hotter. High demand has sent prices soaring. The median home price in December hit a new peak of $600,000, an increase of 20 percent over a year ago. Homes here sell within days of coming on the market, often for substantially more than the list price. In December, a 1600 square foot bungalow in the popular Ballard neighborhood sold in eight days for $750,000 – $75,000 over the asking price. With just a few weeks of inventory available, home prices and competition are projected to stay strong.

No Wage Stagnation on the Eastside

Wages on the Eastside are up

Last month’s U.S. Census report showed that middle-class incomes nationally were stagnant, confirming a trend that has been widely reported. But when 425Business magazine crunched the numbers for a local perspective, the picture changed. Unlike the U.S as a whole, median incomes in Bellevue and the greater Seattle area have risen – and wage growth has been particularly strong on the Eastside. A booming technology industry has made the Puget Sound area’s economic growth a standout.

Home prices soar as well

A steady influx of well-paid tech workers has boosted the local real estate market. With an increasing demand for homes, and not enough supply to meet the need, home prices have soared this year. The latest figures from the Northwest Multiple Listing Service show the median price of a single family home is up 10 percent over last year. If you’re considering selling, you’d be hard-pressed to find a better time to get top dollar for your home.

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