Warren Buffet on Housing

In an interview with CNBC, one of America's best known investors said if it were feasible, he would "buy up a couple hundred thousand homes."  When combining today's low prices with low interest rates, buying a home provides an excellent way to build wealth.

Today, a single share of Berkshire Hathaway (Warren Buffet's investment company) stock costs over $119,000.  Fortunately, you don't need to buy a share of Berkshire Hathaway to take advantage of Buffet's advice.  If you have even moderate credit, you can buy a home for 3.5% down and interest rates near 4%.

If you're ready to start building your wealth, give me a call today!

Buy vs. Rent

A group of researchers at Florida International University recently finished a study that compared the long term economic advantage of buying vs. renting.  The study looks at the "hurdle rate," that looks at whether a person would accumulate more wealth by purchasing a home or investing money elsewhere.  In all 23 markets they studied, they found that buying a home was more advantageous. 

Here is a quick video summary of their findings.

If you're ready to buy a home, give me a call (360-977-8329) or start searching properties at www.johnblomhomes.com

Real Inventory in Clark County

One of the first indicators people often look at to determine the health of a housing market is the months of inventory.  The RMLS releases a market action report each month that shows the current inventory levels.  The Market Action report that came out earlier this week estimated the level of inventory in Clark County at 8.8 months.  In other words, if no new listings came on the market the homes currently on the market would satisfy buyer's demand for almost 9 months.  While inventory levels have generally been a good indicator, they basic calculations (active listings / listings sold in the last month) do not account for today's market for two reasons. 

Reason # 1 - Proposed Homes

Cheap lots and a decrease in material costs have made new construction a great value.  However, financing for builders is still a major challenge, forcing many builders to advertised "proposed" homes.  These are homes they would like to build, if they had a buyer, but either can't get financing to build as a "spec home" or don't want to build as a spec home.  In other words, this homes are not really in inventory yet.

Reason # 2 - Short Sales

When a seller accepts on offer on a short sale and submits it to the bank for approval, listing agents often leave these home marked as active in case the first buyer gets impatient with the process.  If someone wanted to write an offer on one of these listings, however, they would be in "backup" position and would only get the house if the first buyer walked away from the transaction.  So, these homes could more accurately be described as pending, rather than active.

Revising the Numbers

The January Market Action report listed 2615 active listings and 297 homes sold during the month.  2615 / 297 = 8.8 months of inventory.  I re-ran these calculations based on the numbers as of February 22, with pending and sold data going back 1 month.  Here are the base numbers:

Active: 2569
Sold: 286
Inventory: 9 months

Currently, there are 509 proposed listings.  None of the listings that went from pending/active status to sold were marked as propsed.  When the proposed listings are pulled from inventory, the inventory drops dramatically:

Active (not proposed): 2060
Sold (not proposed): 286
Inventory: 7.2 months

According to the RMLS, there are 250 active short sales that already have an offer.  In reality, this number is likely higher and listings have not been updated.  There were 51 listings marked sold that were previously listed as having an offer.  When these are taken out of the total, inventory actually rises slightly due to the number of shorts sales that closed:

Active (no offer submitted): 2319
Sold (no offer submitted): 235
Inventory: 9.9 months

The most accurate measure on inventory excludes proposed builds and short sales with an offer.  When those homes are excluded from active/sold numbers, inventory is at 7.7 months:

Active (not proposed, no offer submitted): 1810
Sold (not proposed, no offer submitted): 235
Inventory 7.7 months

One last calculation...what if someone needed to move into a new home within 60 days?  This would eliminate a short sale and any proposed listings.  The number of active listings drops nearly in half.  For someone in a hurry to move-in, the inventory level drops to 6.2 months. 

Active (not proposed, not short): 1350
Sold (not proposed, not short): 219
Inventory: 6.2 months

When you consider that the RMLS calculated inventory at 8.8 months supply was lower than 2010 and 2011, the revised inventory level is an strong indicator that we will start to see recovery in the market this year.

If you're thinking of buying or selling a home, work with an agent that understands that market!  Call me today! (360) 977-8329

Housing will add to National GDP in 2012

New economic forecasts predict that housing will add to the US National GDP in 2012.  This last happened 7 years ago, before the housing market started to slide.  Some other highlights from the latest Fannie Mae Strategic Research Group Report included improved consumer spending, decreasing unemployment, and increased manufacturing and services activity.

Read the full press release here.

January East Portland Market Report

Pending and closed sales both jumped in East Portland last month.  In SE Portland, pending sales increased 22.2% over 2011, while NE Portland pendings spiked 45.5%

Over the entire Portland Metro area, the months of inventory increased slightly over December (5.3 months in December 2011 to 7 months in January 2012), but still a full 4 months lower than it was in January 2011.  Average price remained relatively stable at $248,900, a drop of only $200 from January 2011. 

Want to know what's listed and what's sold in your neighborhood?  Request a free neighborhood market report here!

January SW Washington Market Report

Market activity continued to increase in SW Washington last month.  The RMLS reported that closed sales increased 6.1% over January 2011 and pending sales increased 25.1%.  Average time on the market dropped dramatically, from an average of 173 days to 128 days.  Inventory also dropped compared with last January, down to 8.8 months.

Although prices continued to fall over 2011 levels, the increase in activity should help prices stabilize this year and possibly start to increase by the end of the year.

Thinking of buying or selling this year? Request a free market report specific to your neighborhood!

Short Sale Pending Change

The RMLS just announced they are creating a new listing category to deal with short sales.  As home prices declined, the number of short sales (a sale where the seller owes more than the current value of their home) increased.  Once a seller accepts an offer to sell their home on a short sale, the offer goes to their lender for approval.  The approval process can take several months.  The transaction is not actually pending, as it requires the 3rd party approval.  But, since most sellers only submit one offer at a time, the listing is not really active either.  This has created confusion, as many listings that show active might have on offer submitted to the bank already. 

To fix the problem, the RMLS is creating a new category called "Short Sale Pending."  This listings will show up with other active listings on any RMLS search, but it's status as a short sale with an offer will be much more clear.  This new category will go into effect in early March, and likely will take a few weeks for listings to be updated and for other websites to program in the necessary changes into their own property search.

Once the change is complete, it will make it much easier for buyers to distinguish which properties they could actually right an offer on and not be in "back-up" position.

Back to Blogging

It's been awhile since I have done any blogging...on September 23 my wife and celebrated the birth of our first child, a beautiful girl named Elizabeth.  Needless to say, adjusting to life as a father required scaling back on some other activities.  We are starting to get into a good routine (fingers crossed), so I'm excited to start blogging again!