The Data Is In

Speaker 1: [0:09] Hello, hello, and welcome to another Awesome in Seattle podcast. This is Christian Nossum with the Awesome Nossum Group. We are, uh, I'm here with the wonderful Charlotte Reynolds.

Speaker 2: [0:20] Woo!

Speaker 1: [0:22] The beautiful Sarah Kate Davis.

Speaker 2: [0:25] Woo.

Speaker 1: [0:28] And Jason Saldarriaga.

Speaker 3: [0:31] As always.

Speaker 1: [0:31] That's what I was waiting for right there. I knew that was coming. I didn't have to call him beautiful or wonderful. I just had to say his name, and he knew how to fill in the blank.

Speaker 3: [0:39] Well, if you called me beautiful, I wouldn't know how to respond.

Speaker 1: [0:42] You would be excited and happy, and I would make your day, 'cause that's the way it is. Um, so today on the podcast, we want to really kinda go into something we haven't really talked too much about yet. Uh, we're gonna give you a quick market update, which there is definitely some change happening that you need to know about. I mean, we're in the middle of May right now, and we're finally getting data from since the pandemic started, and there's definitely change occurring. After that, we're gonna talk about second loans and how they really have changed quite a bit too, and how that can affect, uh, some move-up buyers, which just happens to segue into our third segment, which is all about moving up. So if you're currently an owner and you wanna move up into a bigger and better home, we're gonna talk about that and how things are affecting that right now. So first off, let's jump right in. Jason, what's going on in the market?

Speaker 3: [1:38] Sweet. So yeah, like you said, Christian, we finally have our first full month of data that is during the period of the pandemic, so that's gonna be April. Before, we only had March, which wasn't really a whole month of impact. It was very odd in March. So, uh, speaking to what we're seeing with the data, the median sales price in Seattle increased about $20,000, from 720 to $740,000, um, month over m- uh, month over month. This is almost at historic highs. Mm-hmm. So prices are pretty high right now in Seattle. Um, if you break down that data by price segment, luxury properties, those over 950,000 especially, have actually seen prices decrease, while lower price segments have actually held steady or, um, increased. This is expected. Uh, generally during downturns, luxury properties, luxury anything, luxury real estate, luxury clothing, luxury anything, luxury cars, they're much more, uh- Volatile … than down. Much more volatile than the normal every man, quote unquote, "thing."

Speaker 1: [3:00] Mm-hmm.

Speaker 3: [3:00] And there's a lot of reasons for that. Obviously, during downturns, you're not gonna waste money or spend excess money on something that you don't necessarily need. And so those segments dry up quicker than segments of people that- You know, the houses that people actually need to buy and that sort of thing. The other impact here though is something that Charles is gonna speak about a little more, which is the jumbo loan, the impact that the pandemic has had on jumbo loans. Mm-hmm. So basically, uh, it's really hard, if not impossible, to get a jumbo loan right now. Funding for that has, uh, dried up almost entirely. Charles is gonna speak a little bit more about that. Basically what that means though is to get a loan for more than $740,000, roughly, it's gonna be hard to qualify for that. New listings are down roughly 40% year over year, so that is a huge shock to the market. Yep. Um, I believe that's the h- largest change in history, and closed sales are down 33%. So new listings are down more than closed sales. What that means basically is we've sold some of our inventory. Mm-hmm. We had some inventory held up, and then in the month of April new, some new listings came on. Those sold through, and we sold through some of our remaining inventory that had been sitting for a few weeks or months. Okay. And then median days on market is actually at six days, which is historically low for Seattle. Um, so what we're seeing right now, things are still moving. There's fewer listings obviously, but the listings that are out there are getting a lot of attention more or less. It is still hard to sell bad properties. Um, it's, we're not seeing, or at least I'm not seeing, like, the crazy sales where, like from 2017 and '18, where things were selling that, like, shouldn't. Like, who wants to buy that house?

Speaker 1: [4:55] Yeah.

Speaker 3: [4:55] But if something is good, if it has four walls and a roof, um-

Speaker 1: [4:59] And it's priced well in a good location. And

Speaker 3: [5:02] yeah, it could get multiple offers. We're seeing stuff with 14 offers and that sort of thing. So-

Speaker 1: [5:07] Yep … Speaker 3: um, yeah. That's my spiel. Yeah. So I guess to, to recap what you said, even though, and this is anecdotally what we were seeing before the stats came out, it's still competitive. There's much fewer listings, but there's still, even though there's probably fewer buyers, there's more buyers than there are listings, and therefore it's competitive. Prices are increasing, um, and the market's still hot. All right, let's talk about second loans and kind of how the jumbo market changing up their tune has affected that, Charlotte.

Speaker 2: [5:41] Yeah. So as Jason mentioned before, it's a little harder to qualify now for a jumbo loan. Mm-hmm. Um, you know, that loan cap being 741,750. Um, so a, a way to get around that is something that's called a piggyback mortgage, uh, which is two separate loans on the same home, and this kind of first started when, you know, people didn't necessarily have 20% down, so the, the kind of main structure on that is 80% of the purchase price, and then you take a second loan out, um, for 10%, and then you'd have 10% for your down payment. So that's kind of the main structure when we're not talking about, um, people subbing this for a jumbo loan.

Speaker 4: [6:23] Mm-hmm.

Speaker 2: [6:24] Um, but yeah, this is basically a way for you to still be able to purchase at that higher price range, uh, without having to go, uh, the route of a jumbo loan. So there's a couple of benefits to this. One thing is that you can get a lower interest rate on your first loan than you'd be able to get on a, on a jumbo loan. Mm-hmm. Um, 'cause those jumbo loan rates are just generally higher. Obviously, it's more money, more of a risk, um, so that makes sense that the rate would be higher. And then you also have the potential to deduct the interest you pay on both of your loans, um, when it comes to tax time. Mm-hmm. So that's a couple of advantages. Um, some things to be aware of that are on the negative side, you do have to pay twice on some of your closing costs. Uh, obviously two loans equals two sets of closing costs. And then the second loan will generally carry a higher interest rate, uh, than your first loan-

Speaker 1: [7:17] Yep

Speaker 2: [7:18] as well. And then second loans right now are more expensive, uh, which is historically not abnormal, but just note that as well. They are, again, a little bit more expensive right now- Yeah … due to the demand, I would imagine.

Speaker 1: [7:31] Yep. And it's, it's partly too that, you know, just like all lenders that are doing unconventional funding, it's more risky. And, uh, second loans were in the 3.5% interest range up until about a week ago, and then, uh, all of a sudden a couple of the big players in the second loan market decided to pull out, and the, the lenders that were left were like, "Well, there's less competition. We can ask higher interest rate now." So they did. So now they're somewhere in the 6.5% range or so. So they jumped 3%, but historically that was pretty common for a second loan. Like, that's, that's not a normal… When I heard that, that second loans were in the 3.5% range, I was completely shocked, um, because forever they had been much higher, so. So, let's, uh, go into how that

Speaker 4: [8:33] affects move-up buyers, Sarah Kate. Let's talk about it. So, like we've been chatting about today, there's some things have changed during, you know, the COVID pandemic, um, how that's affected the home buying process, like Shiloh just talked about our loans. So the requirements are tightening up. It's really good to consider how's your life going to be different, 'cause oftentimes more square footage can mean moving farther outside the city Can you sell your current house? Is it in a- Mm-hmm … just like what we talked about. Is it in a good location? Is it move-in ready? Do you need to make any updates or repairs to it? Do you need a budget for those things to get it market ready? Are your finances in good shape? Do you have a nice savings account? Do you have a nice cushion? So you don't wanna go house poor and spend all your money on upgrading to a bigger house. So just really make sure that you can afford that, and chat with your lender to see, you know, how far you can really stretch your dollar and, um, just get the big picture of the cost of moving up. Um, other things- Yep … to consider when purchasing a larger home are long-term costs. So when you do purchase a bigger house, you have higher property taxes, your utility bills are gonna be higher, they require a little more maintenance. So things to consider for sure. You can also sell first and buy later. That allows you to pull the equity from your sale and put that into your new home, which is super helpful. But you'll need to consider temporary housing with Airbnbs and such right now. Who knows what that looks like, and staying with friends. Um, another option is you can ask for a rent back from the buyers of your home, so you can get, you know, an extra month in your home, um, while you look for a new one.

Speaker 1: [10:22] Yep, and you can actually get up to 60 days after closing, uh, per… unless they're paying cash. But if they're getting a loan, the, the seller can stay up to 60 days in the ho- house if the buyer agrees.

Speaker 4: [10:34] Yeah. And you know, some people do also qualify to purchase and then list their current home later. Yep. So those are things to talk to your lender about and see what you qualify for.

Speaker 1: [10:43] Yeah, and that's actually a good point. That's what we've done. Uh, just last week we did that with one, one set of buyers sle- seller, I guess I should say. They're doing both. Yeah. Where it made more sense for them to, 'cause they could, they could qualify for the house that they're buying without selling their house. And what they were doing was, their strategy was, and this is what I think most people in this situation are going to end up doing right now. The strategy is find your next house, get that under contract. As soon as that's under contract, then start the process of getting your house sold. And when you buy the new house, you're gonna get a second loan that we just taught you about. Uh, even if it is at a higher interest rate, it's not that big a deal because the proceeds, the equity that you're going to get back after the sale of your current home, you can use that to just pay off your second loan. There's no prepayment penalties or anything like that. Um, so that's most of the s- that's usually the, uh, strategy that is going on right now. So find your next house, get that under contract, then sell your current home. Pay off the second loan or lower your, uh, lower your, your loan balance, uh, on the, on the new house with the proceeds from the sale of the, of your current home. So that's, that's kind of the, the gist right now, and there was, for a time, there were things called bridge loans available, and during the COVID crisis, those have also dried up, much like a lot of things that deal with credit right now. So unfortunately, that's not much of an option anymore. So if you are in the market to potentially, uh, you know, move up, this is, depending on your area and, and price range of your current home and your next home, it could actually make a lot of sense. We're seeing in some price ranges, uh, not all, but in some, that your sale, your current house, could sell in a very competitive market, and you could buy in a not as competitive market. Um, again, there's a big disclaimer there. That's not everywhere, but in some price ranges that is the case. Um, so you can kind of get the best of both worlds. Sell competitively, buy not as competitive. So it's, uh-

Speaker 3: [13:04] Yeah, it's interesting. We're, we're, uh, gonna keep our e- eyes on this data and see really how this is gonna play out in the long term. Right now, you know, obviously certain things have… Th- the pandemic has had dramatic impacts on certain aspects of the real estate industry. For example, the amount of listings. Um, but in Seattle, we're fairing, at the moment, very well. It looks like there were just so many buyers out there for so long, um, so much pent-up demand that they're still, um, in the market even while other cities might not be fairing as well as we are because of the job market and that sort of thing.

Speaker 1: [13:44] Yep. Exactly. So if you are ever considering doing anything and you just wanna get some advice, we are more than happy to do so. You can schedule that with us for free online, no obligation, uh, right at our website, awesomeandnossum.com/schedule. You can set up, uh… Usually we're, right now, obviously, we're doing almost everything virtually. So, um, just sign up right there. We are available. It's very easy to do. Uh, you just pick who you wanna chat with, and you pick an available time slot, and it just, there you are. You're done. It's that simple. So again, the website is awesomeandnossum.com/schedule, and you can, uh, you can schedule that really easily. We call that usually a strategy session or just a let's talk. It's, uh, it's very simple. So thank you very much for listening. We hope you got a lot out of today's episode, and, uh, we will see you next time.

Speaker 4: [14:44] Bye. Bye. Bye.