Zillow Advice: Market conditions - Hot price point in Seattle

I'm just browsing the local ...

Mon, 26 Oct 2009 01:33:00 GMT

I'm just browsing the local market posts here in order to get a feel for what the agents are seeing... you are all definitely the "eyes on the street" and in the trenches every day.

From a direct lender / mortgage banker's standpoint, although we'd all have to have our heads in the sand to think that we haven't been hit by reduction in values here in the Seattle area, we're still where many people across the U.S. wish they were market-wise. All of the investors say they love loans in WA State. What is interesting though, is that many investors over the last few months have finally put areas in WA on their declining markets lists. This took us awhile to finally get there though. This has been affecting the LTV restrictions or pricing on Fannie Mae / Freddie Mac loans. Not as much on FHA. We've also noticed PMI companies are putting restrictions on their products by requiring higher FICO's and reducing their LTV's. Condos are down to 85% to 90% LTV for PMI in most cases for instance.

While the Super Conforming Programs are limited to $567,500 max loan amounts locally, there are some great Portfolio Lender Super Jumbo programs that offer incredible ARM rates right now. Some have loan amounts up to $3 Million, even with Interest Only loans available. The trade off? Reduced LTV. Most portfolio lenders are limiting their exposure to 75% LTV or less, depending on loan amounts. Higher loan amounts equal lower LTV's. The upside? There are STILL great rates for loans above the Super Conforming Limits. (I just quoted a 5/1 Interest Only ARM rate for a loan amount up to $850k and LTV at 60% IN THE HIGH 3's! Another 7/1 ARM in the low, and I mean low... 4's). If clients are sophisticated and their needs match up to needing lower payments and are ok with shorter fixed rate terms, these Super Jumbo Arms are a good solution and competitively priced. Many times, a 5, 7 or 10-yr ARM will satisfy a borrower's requirements if they don't plan on being in the home for 30 years. Underwriting guidelines can be more stringent in some cases with the best pricing being reserved for highly qualified borrowers. However, by knowing how to navigate these underwriting guidelines and which investor likes what, we save a lot of hassle and heartache for borrowers.

I would agree that the Super Conforming Loan programs are more widely available and require less down... and quite frankly attract more buyers in those ranges that can afford the payments on fully amortized fixed rate loans. These programs, FHA or otherwise, are attractive and have more mainstream Wall St. guidelines and requirements, but even underwriting for those programs are getting more and more strict. 4506's are required by most Wall St. investors these days and full tax returns are pretty much a given. Super Conforming loans are still scrutinized higher than conforming loan amounts just from the sheer loan amount risk and the lenders understanding that if they take a higher priced home back it may take longer to sell off in their REO portfolio. In addition, there are fewer investors in the Super Conforming Loan mortgage pools.

So, all this to say, if a client has an eye on a higher priced home, it's good to know that there are still some options available. If they have larger down payments and are highly qualified, they can really get a good bang for their buck on their monthly payment. By having fewer competing offers in the upper end range, wouldn't they have some great negotiating power? If there are good deals in the $600k to $700k range, one would have to think that there has to be really great deals in the upper end market?

Doesn't really matter what ...

Tue, 26 May 2009 11:19:00 GMT

Doesn't really matter what the price point is, if I had good loan products I could be moving houses all day long! The fact is that things aren't really going strong yet, but there are definitely some pockets of interest, and people would buy more homes if they could.

I've absolutely seen uptick ...

Fri, 15 May 2009 20:48:00 GMT

I've absolutely seen uptick in activity as well, even outside the city in Lake Forest Park. Posted a bit on this topic here:
http://blog.seattlehouses.com/2009/05/13/seattles-zero-lotline-boom-bust-boom/

Amy -- conforming loan limit is an issue, but these sellers of the lower end inventory are going to move somewhere...if they have some equity, they'll be able to buy up considerably beyond that loan cap.

I've been toying with the ...

Fri, 15 May 2009 17:41:00 GMT

I've been toying with the idea of trying to sell my home near Greenlake. I've heard there are currently more buyers for homes at a price point where the buyer would have a conforming loan (currently capped at $567,500 in King County). Simply because it's a lot easier for a buyer to get approved for a conforming loan these days vs a larger one.
So the takeaway on this is that Seattle sellers with homes priced @$500k or above are having a harder time selling...

Curious anyone's experience or opinion on this?

I don't think that Seattle ...

Fri, 15 May 2009 17:33:00 GMT

I don't think that Seattle is different and certainly is not immune to the downturn. However, we work with buyers every day, and we are seeing homes moving faster and competition on a certain, though not all, categories of homes. Whether that sticks or not, I do not have the crystal ball.

Rebecca,anecdotally, i'm ...

Fri, 15 May 2009 17:17:00 GMT

Rebecca,
anecdotally, i'm hearing this from other agents in Seattle

is that another "seattle ...

Fri, 15 May 2009 10:30:00 GMT

is that another "seattle is different" argument?

here is the bad news, you were wrong before and you are still wrong... seattle is no different

don't worry, the increasing ...

Fri, 15 May 2009 08:11:00 GMT

don't worry, the increasing foreclosures will snuff out this urgency by next fall...

We are definitely seeing ...

Fri, 15 May 2009 04:59:00 GMT

We are definitely seeing a lot of activity at the "entry-level" price of $300-350k as well. There is a lot of junk at the lower price points and the nicer homes go quickly, often with competition.

My advice remains the same. Whether it is a hot market or a dismal market, it only takes one other buyer to compete with you. If you find the home you want, you should take action, otherwise you risk losing it.