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Does it pay to remodel?

Pondering a remodel? Did you know some projects actually pay for themselves when it’s time to sell? Remodeling Magazine just released its 30th annual Cost vs. Value report, which provides a detailed analysis into how much popular remodeling projects cost—and the value they add to your home—in various regions across the county. Thanks to our robust housing market, the Pacific Region beat the national average for recoup on every single project.

A few key takeaways we learned from this report are:

  1. Exterior “curb appeal” improvements generally pack a bigger payback than interior projects
  2. Inexpensive improvements are easier to recoup than pricier remodeling projects
  3. Replacement projects usually net more than remodeling/expansion projects—which may explain the relatively low returns on kitchen and bath remodels/additions

For the full Pacific Region report on all 29 projects, including project descriptions and scope, click here!

 

 

Cost vs. Value data © 2017 Hanley Wood Media Inc. Complete data from the Remodeling 2017 Cost vs. Value Report can be downloaded for free at www.costvsvalue.com

Posted on February 1, 2017 at 3:55 pm
Julie Barrows | Category: News, Real Estate

Timing the market right can bring you thousands when it's time to sell

windermere0017-rEver notice how one home on your street sells well above asking price with a line of buyers out the door and an identical home comes on a month later and sits on the market for two weeks before finally selling at a reduced price?

 
It’s not always about the house. So often, it’s about timing the market well.

Every. Day. Counts.
In a world where potential buyers know how long you’ve been on the market down to the minute, being on the market a nanosecond longer than expected can be painful for any seller, financially and otherwise. Statistically, prices seem to peak around Day 7 and begin to slide downhill after Day 10.

How to time the market in a nutshell.
Avoid coming to market during major holiday weeks or when school is on break. Potential buyers take vacation too—and the fewer buyers out there looking in those precious early days, the lower the likelihood you’ll sell in the first 10 days. Look to come on the market a few days after typical vacations are over to allow buyers to re-engage in the search process.

Avoid coming to market when a similar house in your neighborhood has just listed and not yet sold. The laws of supply and demand would dictate that when supply appears abundant, demand diminishes—and the days tick on by. Even if you are by far the better house and at a better price, you might still be hurt by the curiosity around why everyone is selling now.

Avoid coming to market during bad weather or national events. Like coming on market right smack in the middle of Spring Break, listing when everyone’s attention is on something other than home shopping is likely to miss the mark big time. Even if you were all set to list, better to take a deep breath and wait until the storm passes.

Do come to market when you notice an absence of great listings for sale in your price range and neighborhood. Buyers will likely feel that void too and be chomping at the bit for the next great home to come along. The chances of a perfect match between a solid buyer and a reasonable seller are best in this zone.

Final thoughts.
Look at the holiday calendar and local school district calendars to guide you toward best weeks to come to market. Don’t forget to check in big political and sporting event dates too.

The best day to come to market seems to be Thursday. Often listing brokers arrange showings and open houses on Thursday and Friday evenings and throughout the weekend. The best day to review offers is Tuesday (beating out Monday by only a slim margin). This gives buyers and their brokers ample time to see your home, do due diligence like permit research, a home inspection, and a sewer scope—and get their financial documentation together—before they prepare an offer.

Of course, an outstanding listing broker can help you navigate these waters and chose the most favorable date to bring your home to market.

Posted on December 12, 2016 at 1:11 pm
Julie Barrows | Category: Neighborhood Info, News, Real Estate | Tagged , , , , , , , , ,

Western Washington Real Estate Market Update

Posted on August 4, 2016 at 1:17 pm
Julie Barrows | Category: News, Real Estate | Tagged , , , , , , , , , , , , , ,

Should I Buy a Home Now?

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With the recent news of year-over-year home value gains in the 20% range and rents rising at record levels, it made me think about the benefits and drawbacks of home ownership and all of the nuances that go into answering the question, “should I buy a home now?”.

It’s important to remember that the purchase of a home is a lifestyle choice as much as it is an investment. It is not just a commodity to negotiate but also the place you’ll come home to each day and make your own. Yes, it is important to buy wisely and stay within your means. It is equally as important to do what is right for you and your lifestyle now. If you know you’ll be staying in the same place for years to come, you have much more latitude than you would if you might need to relocate in the next couple of years. Having purchased 11 homes over the past 30 years, I’ve learned a few things about good home investments and bad ones. I hope to share a few words of wisdom on the concept of homeownership that might help answer the questions of whether or not it’s right for you.

As you evaluate your options, you’ll want to consider things like initial out-of-pocket expenses, monthly expenses, maintenance and upkeep costs, tax deductions, and appreciation.

 

Initial out-of-pocket expenses. In a home purchase, this is the down payment & closing costs. Depending on the loan program and purchasers credit rating, a typical down payment is 5-20% of the purchase price (of course, more is always an option) and a good ballpark for closing costs is about 3% of the loan amount. Closing costs generally include lender fees, appraisal, title insurance, escrow and reserves. In a rental, this is typically first & last month’s rent plus security deposit.

BUY:  A $500,000 home with 5% down equates to about $40,000 ($25,000 down and $15,000 in closing costs) in initial out-of-pocket expenses.

RENT: A $3,000 per month rental might cost $9,000 in initial expenses ($6,000 first and last plus a $3,000 security deposit).

 

Monthly expenses. In a home purchase, this is the mortgage payment plus property taxes, homeowner’s insurance and depending on the amount of the down payment, mortgage insurance. In a rental, this is typically just the rent.

BUY:  A $500,000 home with 5% down works out to a $2,233 mortgage payment at today’s 3.875% fixed interest rate, plus an estimated $425 in property taxes, $40 in homeowner’s insurance and possibly $290 in mortgage insurance for a total of $2988 per month.

RENT: $3,000 per month.

One important consideration is that the monthly payment in a purchase is essentially fixed for the term of the loan. The property taxes and homeowner’s insurance may increase slightly each year but the mortgage payment stays the same while rent will likely increase each year to keep pace with inflation.

 

Maintenance and upkeep. In a home purchase, you are responsible for everything from the roof to the foundation, plus the grounds and utility and sewer lines. In a condo, you are individually responsible for the interior of your unit and collectively responsible for the entire structure and grounds. The cost of maintenance depends on the age of the home or condo, how well it was built and maintained, and its exposure to the elements. In a rental, the landlord pays for maintenance and upkeep.

BUY:  Plan for 1-2% of the home’s value per year in typical maintenance plus the cost of major components (roof, furnace/AC, paint, flooring, appliances, decks, etc.) based on their life span. These items are easily researchable via inspectors, contractor bids and even google searches.

RENT: Landlord pays for maintenance and upkeep.

 

Tax deductions. In a home purchase, you can write off the mortgage interest (up to a $1M loan), property taxes and mortgage insurance paid. In a rental, there are no tax benefits.

BUY:  On our $500,000 home, the tax deduction might work out to $17,663 in mortgage interest $5,000 in property taxes, and $3,480 in mortgage insurance for a total of $26,143 in annual write-offs to offset your ordinary income.

RENT: Landlord gets the tax deduction.

 

Appreciation. In a home purchase, your investment is leveraged. That means you gain appreciation based on the entire value of your home, not just the amount you put down. That’s like earning interest on $500,000 even though you only deposited $40,000 in the bank.

BUY:  A 4% appreciation rate is a good average to benchmark. Last year’s 20% appreciation rate was unusual and is balanced by several years of negative appreciation between 2008 and 2011. Assuming a 4% rate of appreciation per year, our $500,000 home would gain $108,000 in value over five years.

RENT: The landlord gains the appreciation.

 

 The bottom line. There’s a lot more to consider than just the monthly outgo. A homeowner can maximize their investment by purchasing in a highly desirable area and completing timely maintenance and upgrades or they can waste away their equity by purchasing in a declining or over-built area and allowing their home to fall in disrepair. Only you know you. Are you up for the pleasure, independence, headache, and heartache of owning your own home or would you prefer the comfort and ease of renting someone else’s home with no strings attached, even if it costs more over time. Building wealth through homeownership is an incredible opportunity—but it’s only worth it if you enjoy the ride.

Looking back at the numbers, here’s how a 5-year analysis might pencil out:

BUY:  Your $500,000 home costs about $40,000 in initial out-of-pocket expenses, about $180,000 in monthly payments, and $40,000 in maintenance and upkeep over 5 years for a grand total of $260,000. This is offset by $130,000 in tax write-offs (the net benefit to you depends on your tax bracket) and $108,000 in appreciation.

RENT: A $3,000 per month rental would cost $194,988 in rent payments over 5 years assuming a 4% rent increase each year (a good long-range, though conservative, benchmark, given the double digit rent increases over the past several years).

 

So there you have it. The decision to opt for home ownership is a lot more than a quick judgement call. To do it right, you have to consider all of its aspects—financial, emotional, and even physical and spiritual—and weigh those against your long-range goals and plans. By taking the time to do a thorough analysis of the numbers and an assessment of yourself, you’ll make the best decisions possible and avoid costly mistakes.

 

 

 

Posted on March 11, 2016 at 3:40 pm
Julie Barrows | Category: News, Real Estate | Tagged , , , , , , , , , , , , ,

Appreciation and Affordability in the Greater Seattle-Eastside Region

Given the significant increases in sale prices over the last couple of years, affordability in the Seattle-Eastside region is something we’ve been thinking about a lot. To that end, we’ve assembled a chart that graphs home ownership costs against common indicators. It also compares average monthly mortgage payments to average rents-which have been rising at even faster.

The Western Urban Consumer Price Index is a steady indicator of appreciation. When home prices are in line with this index, they are sustainable. When we climb above the appreciation trend line, we generally experience price correction or wage increases to maintain equilibrium. With the exception of the great recession, most price corrections in the Seattle region have been minimal as prices stagnate while wages and appreciation catch up.

Given the significant price escalation we’ve seen already this year, coupled with this historical data, today’s home buyers should be cautious in purchasing properties for flip, spec or short term investment right now. Certainly some opportunities may pan out, but the risk may be higher than many investors would prefer. Buyers purchasing for long term investment will likely still do quite well as low mortgage payments allow them to purchase far more than they could if rates were higher…and they’ll benefit from those low mortgage payments for the life of their  mortgage.

This year, 30-year fixed mortgage interest rates are expected to rise to 4.4-4.9%. Home prices in core Seattle-Eastside neighborhoods could potentially rise another 8-10% this year (4-6% for all of King County). The Consumer Price Index and wages will likely also rise as our economy continues to move forward. But will they rise enough to stay above the home ownership trend line? That is the million dollar question. We could very well see a price correction if they don’t. Here’s a 5-year snapshot of appreciation by neighborhood to provide additional insight on how each location has performed during that time.

Ultimately, it comes down to doing what’s right for you and your family. We hope this provides valuable insight to help guide your home buying and selling decisions. As always, every home must be evaluated individually for its attributes, location and sustainability.

Appreciation By Area

 

Posted on February 5, 2016 at 1:16 pm
Julie Barrows | Category: News, Real Estate | Tagged , , , , , , , , , , , , ,

Featured Community: Seward Park-Beacon Hill

seattle-i5skyline
Seward Park covers 300 acres and is located in southeast Seattle in the neighborhood of the same name (map). The park occupies all of Bailey Peninsula, a forested peninsula and former island that j…

Source: Featured Community: Seward Park-Beacon Hill

Posted on November 1, 2015 at 8:19 am
Julie Barrows | Category: Neighborhood Info, News, Real Estate | Tagged , , ,

Q4 2014 Gardner Report is out!

Check out the latest on the Seattle area real estate market from a noted economist’s point of view.

Posted on February 26, 2015 at 10:03 am
Julie Barrows | Category: News, Real Estate | Tagged , , , , , , , , , , , , , ,

Check out our new look on Issuu.com

Check out our new look on issuu.com

Posted on February 24, 2015 at 12:37 pm
Julie Barrows | Category: News, Real Estate | Tagged , , , , , , , , , , , ,