ISSUE 102
NEWSLETTER
APRIL 2020
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WITH COLDWELL BANKER TOMLINSON
Believe Me, This Ain’t No 2008! Article by Larry Lapidus, Realtor®
With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for a housing crash along the lines of the one we felt in The Inland Empire from 2007-2011. In fact, conditions are entirely different from, and in some ways opposite to those that contributed to that bleak period: 1. Mortgage Standards are Much Stricter During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. As shown below, during the housing bubble, the Mortgage Credit Availability Index, issued by the Mortgage Bankers’ Association, skyrocketed. The higher the number, the easier it is to get a mortage. 2. Prices are not soaring out of control We are all aware of how home prices have risen recently in our region, but appreciation has not been nearly as rapid as it was fifteen years ago. The average rate of appreciation is 3.6%, so while the recent rate is higher than normal, it is certainly not accelerating beyond control as it did in the early 2000s. 3. We currently have a shortage of homes, not a surplus A balanced real estate market holds six months of inventory for sale. Much more than that is an overabundance and will cause prices to depreciate. Fewer than five months of inventory is considered to be a shortage, and will cause prices to rise. As the graph shows, there were too many homes for sale in 2007, which caused prices to tumble. Today, there is an unprecedented shortage of inventory, causing prices to rise. 4. Surprise! Despite the increase in prices, today’s homes are more affordable The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Though prices have risen, wages have increased and the mortgage rate dips below 4%. That means the average family pays less of their monthly income toward their mortgage payment than they did in 2005. 5. People are equity rich, not tapped out In the run-up to the housing bubble, it was common to use a house as though it were a personal ATM machine. As soon as equity appeared, it was siphoned off . Today, many people have above 50% equity in their home, and are leaving it alone, resulting in a national equity pool of over $500 billion:
annual home price appreciation
months inventory of homes for sale
percent of median income needed to purchase median-priced home
total home equity cashed out
The Panic of 1893 Article by Larry Lapidus, Realtor®
T
his is no doubt that the coronavirus crisis is having a serious impact on our region’s economy, but this will not be the first blow it has received. For perspective, consider the impact made by the financial crash of 1893 on our fair city, as described by the late Tony Bamante and his wife Suzanne in their book, Spokane: Our Early History. The accompanying advertisements from a few years later show how things bounced back. Copies of the book are available through your Tomlinson agent. By 1892, Spokane was on its feet again, and according to a list in the New York Tribune that year, the city was able to claim six millionaires among its ranks. Along with the list of names were the sources of their wealth. They were Frank Rockwood Moore (silver mining and real estate), John J. Browne (real estate and banking), Anthony M. Cannon (real estate, banking, and railroads), James N. Glover (real estate and banking), Robert W. Forrest (real estate and banking), and the estate of E. J. Brickell (real estate and local water-works). Unfortunately, their status and the city’s newfound sense of stability would be short-lived. The reasons were many and complicated, but in 1893, an economic panic threw the country into a downward spiral, plunging it into the greatest depression it had yet to experience prior to the Great Depression of the l930s. The rolls of unemployed spiked out of control, businesses closed, and banks began to fail in Spokane. The town’s first bank, Anthony Cannon’s Bank of Spokane Falls, was also the first to fail. After its closing on June 5, 1893, like dominoes, the other ten banks closed, seven of which never reopened. The Browne National Bank managed stay open until November 22, 1894, but it, too, succumbed to the ravages of the depression. Four of Spokane’s most significant early developers — Glover, Browne, Cannon, and Cook — lost nearly everything. Glover and Browne eventually repaid their bank depositors and, in time, recovered their fortunes. Cook pursued other endeavors, and Cannon died in 1895.
Many others among Spokane’s class of wealthy and elite also lost their fortunes. After the Great Fire, Spokane was rapidly overbuilt and overfinanced. Those most affected by the Panic had large mortgages and deep debt. Foreclosures followed inability to repay mortgages, a large percentage of which were held by the Northwestem and Pacific Hypotheekbank. For a considerable time thereafter, much of Spokane’s valuable real estate was owned by the Dutch mortgage company and its investors. It had taken over millions of dollars worth of buildings, commercial sites, thousands of acres of farm land for which there were no buyers, and many private homes. There were others who also profited during this time — those with capital to invest. The investment opportunities seemed nearly endless. Despite the Panic, the city continued to show growth. A number of new homes were built in 1893, and attendance in the city schools was 3,326 compared to 2,880 the year before. Near the close of 1894, the real estate records for the previous 11 months totaled over four million dollars.
HOME RECIPES
stay inspired: what’s cooking around the world
home systems: ESSENTIAL HVAC SPRING TUNE-UP inspected and cleaned. You can beat the summer rush to have the AC checked and avoid the fall rush to have the heating checked. The warming temperatures in the spring allow for the AC part of a system to be tested properly. This is something that should not be done in cold temperatures (above 50 degrees is preferred). During the inspection have the heating portion of the system checked, also. A thorough inspection will include checks for energy input vs. heat output, a heat exchanger inspection, testing of electrical components and overall mechanical integrity. If you are not sure who to call, contact your Coldwell Banker Tomlinson agent for the name of a reliable HVAC contractor.
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ach year as winter fades and spring comes to life, we are afforded some relief with our energy consumption and costs. Heating season is nearly over, and airconditioning season has not yet arrived. This would be a good time to check both the heating and cooling functions of your HVAC equipment. Spring is a perfect time to have the system professionally
Do not forget to change your filters as needed. A quality inspection will include this service at the time of service. Be sure and ask questions of your technician, as they can be quite informative and helpful. HVAC service companies are an essential service and now is a good time to get on their schedule before the construction industry gets back to work. Article by Dale Smith, RealtorÂŽ
Coldwell Banker Tomlinson 4102 S Regal St, Suite 201 Spokane, WA 99223
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ISSUE 102 | APRIL 2020 ©2020 Coldwell Banker Tomlinson. All rights reserved. Each office is independently owned and operated. If you currently have an Agent assisting you with the purchase or sale of property, this is not a solicitation for business.
SPOKANE REAL ESTATE MARKET STATISTICS sp okane county march 2020
$308K 24
average sales price
days on market
592 559 current inventory listings
closed sales
MARKET UPDATE We must bear in mind that the figures for March are trailing indicators of decision decisions made and actions taken as far back as far back as last December, and, except in a very few cases, not more recently than the end of February, when the coronavirus was just a dark cloud on the western horizon. Considered in this way, they show in stark relief the fundamental pressures motivating buyers and sellers before they were all told to stay home: intense eagerness to buy, and guarded reluctance to sell. The first powerful force, commonly known as “demand,” resulted in huge increases in the number of sales and in both average and median prices. As striking as the year-over-year figures are that we see here, the month-to-month percentages are even more remarkable, with March’s Average Sales Price 6.2% higher than February’s, and its Median Sales Price up 7.4%. Those numbers may not seem significant, until you realize that increases like that ordinarily take a year to achieve, not just one month! Article by Larry Lapidus, Realtor®
The information in this report is compiled from a report given by the Spokane Association of REALTOR®’s and to the best of our knowledge is accurate and current.
CONTACT ME WITH ANY QUESTIONS OR FOR DETAILED MARKET INFORMATION.