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Mack McCoy's Blog

By Mack McCoy | Broker in Seattle, WA
  • Case-Shiller: Home Prices Accelerate in January

    Posted Under: Market Conditions in Seattle  |  March 27, 2013 8:19 AM  |  1,177 views  |  1 comment

    According to the Case-Shiller report released today, the Seattle market has been calm and relaxed, with values remaining stable over the past seven months, as the index drifts between 141 and 142 (41%-42% higher than in the year 2000).

    January was crazy.

    Sales reached a six-year high, which isn't very high, because January is usually the month with the second-fewest sales behind December.

    The market is in a frenzy, and the data doesn't really seem to show just how insane things have gotten in the local market.

    The Northwest Multiple Listing Association has felt the need to remind members (agents) how to behave in a fiery-hot market with many buyers chasing absurdly few listings. Agents have been reminded to be cooperative when showings overlap; to not "hog" the property and allow other agents to show, as well. Agents have also be warned about pre-marketing listings, as the NWMLS has had a strict and universally adhered-to policy of submitting new listings within 24 hours of receipt and exposing them to the entire marketplace.

    But if you look at the data, you'll see calm and tranquility. We see that we're back to 12-hour work days, which we don't mind at all!

    Check it out here.

    Originally posted at http://cynthiaandmack.wordpress.com

  • Homes today: more affordable than at any time since when?

    Posted Under: Market Conditions in Seattle, Home Buying in Seattle, Financing in Seattle  |  May 9, 2012 1:53 PM  |  1,332 views  |  2 comments

    Home values in King, Snohomish, and Pierce counties, as measured by the Case-Shiller Index, are down 30% from the peak in July 2007. This is hardly an all-time low; they’re at about the same level they were at in 2004, which was a time of then-record price highs.

    Mortgage rates are at their lowest level since the Truman administration, and that’s having a profound effect on affordability.

    Put record-low mortgage rates together with today’s home prices, and you’ve got monthly payments that are their lowest since the 1990s!

    At the peak of the market, a niceSeattlehome might cost $500,000. With a 6.5% interest rate, a minimum-down buyer would have $3050 mortgage payment.

    Today, that home might cost $400,000, and with interest rates under 4%, the monthly payment goes down to $1815 a month:

      2012 2007 2004 1999 1998
    House Price $400,000 $500,000 $400,000 $293,000 $269,000
    Loan Amount $386,000 $482,500 $386,000 $282,745 $259,585
    Interest Rate 3.9% 6.5% 6.0% 7.6% 7.0%
    Monthly Payment $1,815 $3,050 $2,314 $1,996 $1,727

    You could look at this from a point of view that today’s buyers are spending 40% less on their mortgages than just five years ago; you can also look at it that today’s buyers have a third more purchasing power than in the past: 

      2012 2007 2004 1999 1998
    Purchasing Power $400,000 $297,586 $313,726 $266,395 $282,721
    Loan Amount $386,000 $287,171 $302,746 $257,071 $272,826
    Interest Rate 3.9% 6.5% 6.0% 7.6% 7.0%
    Monthly Payment $1,815 $1,815 $1,815 $1,815 $1,815

    Either way – the combination of record-low interest rates and bottom-of-the-market prices are making homes much more affordable than at any time in the last dozen years.

    Move-up homebuyers who may be discouraged by the currently low values - take heart; you'll more than make up for it on the buying end!

  • Seattle: Multiple Offers Go Wild as Inventory Evaporates

    Posted Under: Market Conditions in Seattle, Home Buying in Seattle, Home Selling in Seattle  |  March 14, 2012 1:56 PM  |  1,470 views  |  No comments

    Twelve offers on a bank-owned property in a Shoreline subdivision near Innis Arden, list price $450,000. More than a dozen offers on a Wedgwoood house listed at $550,000 that reportedly drove the price into the sixes. Open house counts in the sixties and seventies and more.

    629 Seattle house listings went pending in the last 30 days, with 1081 left on the market – less than a two month supply. 245 condos went pending in the same period, leaving 654 on the market, about a ten-week supply.

    Why? We don’t know. The market usually heats up at the beginning of the year, carrying into the spring, but this is something we haven’t seen in years.

    One pressure on buyers is from the FHA, which will be increasing the amount of up-front mortgage insurance from 1% of the loan to 1.75% on April 1st.

    Interest rates are at amazing lows – basically, a good borrower can qualify – at 28% debt-to-income ratio – for a loan that’s almost five times their annual income.

    Stats are self-compiled, the NWMLS is not responsible for my arithmetic.

  • Do We Need To Give Up The Mortgage Interest Deduction?

    Posted Under: Home Buying in Seattle  |  August 5, 2011 10:46 AM  |  1,721 views  |  1 comment

    Currently, homeowners can deduct the interest payments on their mortgage from earned income, on mortgages up to $1,000,000. There is a proposal floating around in Washington to reduce that amount to $500,000, and some discussion on whether it should be eliminated entirely.

    The Seattle Times reprinted a piece yesterday that appears to be preparing the path toward this end, referencing a study by the conservative Reason Foundation that suggests eliminating the deduction altogether to pay for a revenue-neutral 8 percent cut in federal taxes for everyone. According to them, about 25% of taxpayers currently benefit from the mortgage-interest deduction.

    What has not been mentioned in this discussion is that owners of rental property have no limits as to how much mortgage interest they can expense. Essentially, this proposal would make homeowners the only class of property owner for whom mortgage interest would not be deductible. Your landlord would be able to deduct mortgage interest, but you, as an owner-occupant? Nope.

    According to the article, “only” 25% of taxpayers “benefit” from the homeowner mortgage interest deduction. Which, we suppose, makes it an easier target.

    In our view, eliminating the mortgage interest deduction would penalize home ownership, and promote landlording. As both homeowners and landlords, we think this is unfair to homeowners and would discourage home ownership.

    Now, if Washington wants to eliminate mortgage interest expensing for everyone, well, that’s a different discussion altogether.

  • Are Small Multi-Family Properties Good Investments?

    Posted Under: Market Conditions in Seattle, Home Buying in Seattle, Rentals in Seattle  |  March 7, 2011 12:33 PM  |  1,985 views  |  No comments

    There are two important aspects to investing in real estate – speculating on future values, and the cash return from renting to tenants.

    For years, investors were willing to accept small cash returns in exchange for the prospect of future appreciation; nowadays, investors are looking much harder at the balance sheet.

    And the balance sheet for 2-to-4-unit properties is, surprisingly good.

    We’ve done a survey of small multi-family sales in Seattle proper since 2008, and found that the combination of lower prices and higher rents are resulting in higher returns for investors.

    1H 2008          4.3%
    2H 2008          4.4%
    1H 2009          4.8%
    2H 2009          5.1%
    1H 2010          5.1%
    2H 2010          5.5%

    The % figure is Cap Rate, which is calculated by dividing the net income of a property by the purchase price – a typical small multi-family purchased in the first half of 2008 would return 4.3% annually, one purchased in the second half of 2010 would return 5.5%.

    We’ve calculated “net income” by taking the reported rents, deducting 25% for expenses – vacancy, maintenance, management, taxes, insurance, and utilities. The actual expense vary by property, but 25% is an accepted industry standard for simplifying analysis.

    Typically, these properties “break even” from a cash-flow standpoint with about 30% down, meanwhile, your tenants are paying off your mortgage for you.

    Even with the volatility in the residential real estate market, rents have remained remarkably stable over the past few years; long-term holders of rental property have been enjoying significant cash-flow during the recent downturn.

    Data was compiled by Cynthia & Mack, and the NWMLS is not responsible for our use (or misuse) of their data!

  • Strapped for space? How about a 24-room, 344-sf apartment?

    Posted Under: Remodel & Renovate  |  November 26, 2010 10:05 AM  |  1,657 views  |  3 comments

    Ask architect Gary Chang how to live in a 344-sf Hong Kong apartment, and he'll tell you, turn it into twenty-four rooms. You can see it all in this four minute video, read more about him in the New York Times, or visit his website.

  • “I want to buy a house, but I have bad credit. Can anybody help?”

    Posted Under: Home Buying, Financing  |  November 10, 2010 2:27 PM  |  1,688 views  |  1 comment

    This is a common question on Trulia’s Q&A boards, and there’s really a very simple answer which nobody seems to like, and that is:

    • Rehab your credit, then buy a house.

    What these posters seem to forget is that credit problems are like ankle sprains; you can’t just go back out and run on it, you have to have some discipline, you have to strengthen that ankle and get it back in shape so that when you do go back out on the track, it holds up underneath you.

    Rehab your credit. Establish a history of paying your bills on time, of paying down your credit cards, and saving a little money.

    Once you’re in the habit, then – and only then – should you be thinking about taking out a thirty-year loan commitment, such as a mortgage.

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