Alicia R. Reid

Hi Papoo,

So far none of us have a crystal ball, but I will go with the fact that our prices are still falling in Sammamish, so we have not bottomed out yet. We won't know when we have hit the bottom until we have an uptick. That's the part that is difficult to surmise. But even with one good economic indicator nationally, real estate markets are extremely local. So what I have recently read from a seemingly brilliant 2nd generation economist is that we will not experience price stabilization until we have 3 consecutive months (a financial quarter) of growth in the leading economic indicators for our region ie. increase in jobs, decrease in layoffs, decreases in foreclosure filings down to "pre-depression" rates for King County, growth in national Gross Domestic Product output, etc. I tend to agree with the philosophy of reading the economic indicators instead of trying to read tea leaves. I'm a pragmatist and I will believe we have hit bottom when I see it.

Foreclosure filings were up in March of this year, but about 67%. What that means is that six months later, you will see a dramatic increase in the actual foreclosures. (So September is when the massive foreclosures will begin). We ain't seen nothin' yet. If I must take an educated guess I would say that we will probably have lower prices this fall and winter. Most of the banks are not being realistic with short sale offers, and they will start the bidding too high at auction for most investors to take a risk offering on something without an inspection. So the properties will largely end up back as bank owned inventory commonly called REO's.

That being said, we're most likely not going to have prices like Florida or Nevada, there's a comparative shortage of buildable land in King County. So you can give up the dream of finding the $150,000 brand new tract house in Sammamish. Population and demand is too high for that to happen.

The reality is that when you find a property that is a compelling value on a property that has a location you like and it meets your needs for shelter or as an investment, buy it. Waiting is a gamble, the properties that are unique or have something rare like views, waterfront, or an amazing lot or floor plan are things that people get truly passionate about. Those are properties that will appreciate well in the future. They don't generally make it to the foreclosure stage.

There are a large number of cash buyers out there, and they are really coming out of the woodwork right now, but they are cagey and many will wait for the winter. So you will have competition either direction. Your best bet is to negotiate a fabulous deal on a property that you can single out from the pack, tie it up in a contract, put it under the microscope of a thorough inspection or inspections and then decide if it meets your objective or needs. You may even find a bargain among the REO's with a bank who has rejected other good offers finally weakening after receiving several offers and rejecting them. Just make an offer on something, you never know until you try.

Even if we do hit the bottom of this next winter, and prices do stabilize by mid-2010, as everyone hopes, it is unlikely that we will have any serious appreciation for at least 3 to 4 years to bring us back to the current level. So only buy a property if your plan is to hold on to it. Flipping is unwise. A property may fluctuate in value throughout your ownership, but it is only a loss if you sell it when the market is down. - Wed Jul 22 2009, 18:02