Kathleen Philippsborn
Personal Service, Professional Standards
360.672.1512 Cell / whidbeyhomes@yahoo.com
IT'S ALWAYS DARKEST BEFORE IT GOES TOTALLY BLACK!?
The housing market turned the corner! [ Oct 09 Home Sales ] Or maybe it's just an uptick caused by the (recently renewed) tax credit, and will soon resume its plunge. Or it's approaching the bottom but isn't quite there yet? [ Market Hasn't Bottomed ] Likewise, the Dow will absolutely soar to 15,000! Except that the bull market is unsustainable because the fundamentals don't support it. The stimulus plan is working! No, it isn't! Yes, it is, but it needed to be bigger! And the recovery is definitely going to be "L-shaped" . . or "U-shaped." Unless it's a "V" or a "W"!!
Welcome to the world of today's economic "experts" who spout their opinions with the absolute conviction of people who don't have to live with the consequences of their advice. You, on the other hand, face major financial decisions - such as whether or not to buy or sell property - knowing that how it turns out will be a major factor in determining your family's standard of living for years to come. And the repercussions of doing nothing while the economic landscape shifts beneath your feet could be as severe as doing something and having it turn out badly. So what do you do?
As I've consistently argued on this page, when it comes to real estate, I believe that you need to ignore all the static and stick to the basics, to concentrate on what you know, on what's real. And above all, you need to be as well informed as you can possibly be on the specifics of your transaction. My clients are confident that they're armed with the most comprehensive, up-to-date information available pertaining to the Whidbey Island housing and property market. Remember: National statistics don't mean a thing if you're trying to decide whether to buy or sell property on Whidbey Island. Location, location, location! It's true in an up market; it's true in a down market. What happens in L.A. or Detroit, or even Seattle doesn't mean a whole lot with regard to real estate in Coupeville, Freeland, Langley, Greenbank, Clinton, and Oak Harbor. So what do we know?
First, we know that the majority of indicators show, and most analysts agree, that on the national level, the housing market has turned the corner. Most areas have either bottomed, or are close to it, and a few isolated areas are even reporting bidding wars amongst buyers on bargain-priced homes in desirable areas. The ratio of homes prices to both family income, and to rents, which got badly skewed during the bubble, are essentially back to normal. That doesn't mean that the market couldn't flatten out or turn down again, but the trends are all pretty consistent across the board. See for yourself: Here are updated versions of the Case-Shiller graphs that I've been featuring on this web site for some months, for the U.S. national market and Seattle:
Second, we know that the real estate business on Whidbey Island has picked up dramatically over the last couple of months. I see it at Whidbey Properties, I see it at other agencies, I see it in the lists of pending sales and closings, and I'm seeing prices starting to stabilize. A few sellers are even fielding multiple offers. Prices here on the Island, in general, didn't drop as dramatically as in many other areas because there was never really that much of a bubble to burst, and the Island's major employers, NAS Whidbey, Nichols Brothers' shipyard and Boeing, are holding up fairly well.
Third, we know that housing prices have fallen considerably. Not exactly a news flash, I know. But the point is that you can buy a lot more house for the money than a couple of years ago. Is it time to jump in, if you're a buyer? Consider the following -
Fourth, we know that how much house you can afford depends almost as much on mortgage interest rates as it does on the purchase price. For example, at 5% interest, you can borrow $200,000 and end up with a P&I of about $1,073 on a 30-year fixed mortgage. But if rates go up to just 6%, and that's all the monthly payment your budget allows, you'd only be able to borrow $179,000. Not only would housing prices have to fall another 10% to make it affordable (doesn't seem likely; see graphs above), but after 10 years in the house, you'd have paid over $8,000 more in finance charges and have around $8,100 less in paid-off principal. Are rates going to go up? We don't know that for a fact, but as most economists will tell you, it's a pretty good bet: 
(1) Mortgage interest rates are at record lows [ Mortgage Rates ], (2) They're being kept that way artificially by the Fed, which will start hiking its rates as soon as the economy improves to keep inflation under control (owning a home is a great hedge against inflation), and (3) massive federal borrowing to cover the deficit will put pressure on rates as well. And for what it's worth, none of the mortgage brokers I've talked to expect to see home loan rates much lower than they are at the present. My husband and I recently refinanced our own home - I do put my money where my mouth is. If you're waiting to see if property prices fall some more, you need to factor in how an increase in interest rates would affect the amount you can borrow, and how much more it would cost you over time.
(1) Mortgage interest rates are at record lows [ Mortgage Rates ], (2) They're being kept that way artificially by the Fed, which will start hiking its rates as soon as the economy improves to keep inflation under control (owning a home is a great hedge against inflation), and (3) massive federal borrowing to cover the deficit will put pressure on rates as well. And for what it's worth, none of the mortgage brokers I've talked to expect to see home loan rates much lower than they are at the present. My husband and I recently refinanced our own home - I do put my money where my mouth is. If you're waiting to see if property prices fall some more, you need to factor in how an increase in interest rates would affect the amount you can borrow, and how much more it would cost you over time. What do you think? Well, if you're an optimist, this is an historic opportunity to buy a house or land because the housing market has bottomed, the economy is recovering, and interest rates are as low as they'll probably get. Remember, shrewd investors get most of their gains at the beginning of a run-up (most ordinary folks don't jump in until after the trend is well-established, only getting in when the party's almost over). And if you're a pessimist? Well, Dr. Marc Faber, the highly-respected financial consultant (also known as "Dr. Doom") who foresees severe problems ahead for the U.S. economy, recommends buying tangible assets, including real estate, to protect your wealth from a decline in the dollar.
Whether you're a first-time buyer, an investor or someone looking to move up into your dream home, what are you waiting for? Conversely, if you're a seller who's been waiting for the free-fall in housing prices to stop, it might be time to start getting your place ready for prospective buyers. There are never any guarantees in real estate, but by having a real estate professional (like, say, ME) in your corner, by sticking to the basics and concentrating on what we know, you can make an informed decision based on facts rather than speculation, guesswork and opinion. And maybe that'll help you sleep a little better at night. I can find you a good deal on a house or land, or I can help you stage and price your property, and bring you buyers. Call me. Let's talk.