By, John Wahl

Due to the declining Real  Estate market lots of area builders have been sitting on finished homes  making payments every month and have been watching their profits disappear. Some Builders have either had to give their homes and lots back to the bank or have depleted all their reserves and are on the brink of having to do so. Where does this leave us in Snohomish County as far as the new construction market is concerned? For the most part it puts the product in the hands of the local banks who made the loans to area builders to buy finished lots and build new homes. The banks are having to take back the homes and lots and turn those non-performing loans into performing loans. How is this possible in this market? Well the answer is pretty easy; it all comes down to affordability and the banks have reduced the sales price of the homes to where they are generating good sales activity. In 2007 Snohomish County was closing on average 310 new homes per month; in 2008 that number slipped 51.5% to 159 homes closed per month and in January of 2009 we saw 69 new homes close.

The upside is we are starting to burn through the existing inventory and the sales rate will start to increase. Local Banks are offering incentives to buyers to purchase a new home and obtain their mortgage through that Bank. The banks are willing to do the loan for a lower interest rate than what a buyer could get elsewhere and therefore they turn a loan on a property that a builder stopped paying on into a loan that the new buyer is paying on back into performing loan. The upside is that people are able to get a great value on a new home. The downside is any builders left in the market find themselves competing against the bank; sometimes the same bank they received their construction loan from. If the existing builders cannot stay in the game they too may have to give property back to the banks. This will eventually wash the market clean and will reset the values on homes and land.

We have all seen the double digit appreciation with real estate over the last decade and now the correction is happening. Historically real estate has  appreciated  around 4% per year and most local analysts are hopeful that we will bottom out at the appreciation point that we would be at if we had only bee appreciating at 4% a year over the last decade. Some areas in the county will be harder hit than others because of over developing thus throwing the supply and demand way out of balance. Some areas will bounce back faster because of a lack of supply and a healthier demand. Local banks will continue to take losses by selling off new homes they have taken back in hopes to balance out their portfolio. Some banks are being very aggressive at this and some are still in denial of the overall size and scope of what they are dealing with.

The bottom is near and house and land values are resetting; we will see soon what banks and builders are left standing as we start a new chapter in the real estate cycle. If you are a qualified buyer or have ever considered an investment now is the best time to get a new home with a great interest rate to go along with it.

It’s June 2008 in the great Pacific Northwest and raining cats and dogs and I beleive everyone is in a funk. The Wall Street Journal reoprted May 6th 2008 that the Housing Crisis is over and we are on our way up. With that being said we have a lot of inventory to burn through to reach that balance between supply and demand and the big question is how long will it take to get there? Currently we have around 6500 finished recorded new lots with about 1500 having new homes built on them and 4000 sitting vacant. Snohomish County new home sales are averaging about 200 per month so at this rate we have a 3 year supply; these numbers are down by about two thirds from our peak at the end of 2005. Many builders are in need to move their inventory because the interest from the bank is eating into their bottom line and developers need to sell their lots as well. We have seen signifigant price drops in the housing market and it is a buyers market with lots of deals and negotiating power. The Snohomish County lot sales on the other hand have not decreased in price as much and sales are at a basic stand still.

In Snohomish County in 2006 we sold 1980 residential building lots and in 2007 we sold 1874 building lots; for the first quarter of 2008 we have sold 47 building lots a decrease of 94.5% 1 year ago. The bottom line is we need to sell off our housing inventory in order to see some lot sales; developers are still asking yesterdays price because they have nothing tangible to compare prices to. The pipeline is also full with roughly 16,000 lots being processed in Snohomish County for a total of 602 plats. All of these plats probably won’t make it through because they were purchased at too high of a price to be in line with todays numbers even though were not sure where that’s at.

The subprime lender meltdown has now put FHA financing back on top and with the buyer assistance programs it could be even better than before. As the lenders get their acts back together and the Snohomish County job market continues to get better we will see more people move into this area. The slow climb out of the slump will help to stablize the market and get us back into perspective as this market correction starts the next cycle.

Washington State enacted a Growth Management Act in early  to mid 90’s in order to confine Growth in the state to urban areas and within cities limits. The theroy is to control sprawl and create density therefore having people live near their jobs and have less traffic. The outcome has caused confusion and anger with citizens because most people don’t understand the act. What a lot of Goverment officials hear is people don’t like sprawl and they don’t like density; so where does the balance lie without compromising our enviorment and natural resources?