Jan
6
Issaquah Highlands Homes Still Appreciating in Value - Part 2
Written by: rebecca and filed Under Blog, Buyers, Issaquah Highlands, Real Estate |
Last month I posted an article about the appreciation that real estate in Issaquah Highlands has seen. The data I used included all single family homes (not condos) that sold during during two different time windows; January 2006 through November 2006 vs January 2007 through November 2007 and November 2006 vs November 2007. The post generated much debate about whether or not there has actually been any real gain in the typical home in the Highlands and some went as far to say that they would not be surprised if growth was flat if not negative.
I agreed that the numbers may have been skewed by the appreciation at the low and high end of the price ranges so in order to accurately analyze what is really happening to a typical house in Issaquah Highlands, we all agreed to a consistent definition of what the typical home looks like. I am going to use homes that meet the following criteria:
Home Type: Residential
Bedrooms: 3 to 4
Bathrooms: 2 to 2.5
Square Feet: 2000 to 2500
Rather than just look at the same time ranges as before, I am also going to expand the windows a bit. The new data will look at all of 2006 vs all of 2007 as well as Q4 - 2006 vs Q4 - 2007.
It turns out that the number of units for this refined data change quite a bit. This is primarily due to the square footage and bathroom constraints. Units analyzed has dropped from 381 for 2006 and 236 for 2007 to 59 for 2006 and 46 for 2007. The one piece of data that did not change too much was the sold price ranges these homes fall into. With the new constraints the home sold price ranges from $250,000 to $700,000. Without the constraints the homes ranged from $200,000 to $2,000,000 with 95%+ falling into the $250,000 to $700,000 range. So really what applying these constraints has done is 1) remove the high and low ends of the sold price ranges and 2) remove homes that were either much larger or much smaller (+/- 10%+) than the average home sold. Which brings us to the actual data.
Issaquah Highlands single family homes saw the median home price increase 16% between 2006 and 2007, from $534,900 to $617,975. However, the number of units sold are down to 46 in 2007 vs 59 in 2006. Days on market have increased as well indicating that the market has slowed down. (see graphs).
Issaquah Highlands single family homes saw the median home price increase 21% in the Q4 - 2007 compared to Q4 - 2006, $509,990 to $615,000. The total number of units sold are still down and days on market have increased still supporting that the market has slowed in this area. (see graphs)
While market times are longer than we have seen in years past, the numbers show that home owners are still seeing appreciation year over year. What is getting home owners into trouble is the type of financing they have arranged. With some of the “creative” options that have been out there, it has not been difficult for home owners to find themselves upside down in a property. It is a very unfortunate circumstance for people to be in, but I don’t see that carrying over into causing real estate is a bad investment right now. We are fortunate to live in an area of the country that has a very diverse job base and a strong economy - not to mention that it is just plain beautiful. As buyers start the new year off and take a look into buying a home I say good for you. Just be sure to do it with your eyes wide open, look at all your options and make sure you understand the type of financing you are obtaining so that you don’t find yourself as one of the unfortunate souls that is upside down and backwards in their home.
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11 Responses to “Issaquah Highlands Homes Still Appreciating in Value - Part 2”
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Rebecca, thanks for the updated analysis. I’m not sure if I agree with your conclusions about appreciation. Just because there have been more transactions at higher price points - thus raising the median - doesn’t tell us anything at all about specific homes moving from lower to higher price points.
The 64 thousand dollar question is this:
If you bought a house for $535K last year, could you sell if for $618K right now? I think the answer is a resounding “no.”
As an example, on my street, a house sold for $798K in November 2006. Presently, the house that is right next door to it (same size, newer, better lot, more upgrades, different floorplan) has been languishing on the market for over a year now and is currently listed at $749K (the owners are now desperately looking for renters because they can’t move it.)
I’d say that if you bought in Q4 06 you are highly unlikely to get that price today. When you factor in transaction costs and taxes, I’d say it’s very likely that you will be down thousands (if not tens of thousands) of dollars.
Re the financing, IMO, it was the #1 cause of getting us into the bubble to begin with. Now that that financing has dried up, look for prices to go down a lot.
If buyers are looking in the New Year, I’d give them the advice of not even considering paying more than 85% of the listed offer price.
Shaq,
First off, I want to thank you for engaging in a logical and civil debate. It is refreshing to see someone that wants to actually look at data rather than just make blanket statements with no facts to back them up. That said, let me see if I can dig into your comments some more.
What are you getting at here? The data is what the data is. It shows that comparing 2006 and 2007 - YoY and Q4, Issaquah Highlands homes appreciated.
If you want to try to look at specific home, then that’s a different story but I can tell you how that ends now - DATA NOT FOUND!!! Issaquah Highlands have seen no homes that were sold more than once between January 1, 2007 and today. At least that’s what the data I have access to says. Rebecca should be able to confirm or deny that.
Your question of if you bought a house last year, could you make a profit if you sold today is somewhat of a loaded question. You haven’t defined the date at which you purchased it, the specs of the home, the condition of the home vs when you bought it etc. Not to mention you will never know what price you can sell it for until it actually sells.
Your example is not apples to apples because you are using homes that are at the upper end of home prices here. Those homes are all languishing.
Your comment “if you bought in Q4 06 you are highly unlikely to get that price today” is just incorrect IMHO and the data proves that. No it doesn’t show specific homes that were bought in Q4 06 and then resold, but it does show that homes of similar traits that were bought in Q4 06 were sold in Q4 07 for more money. That is exactly what your example is showing, no? (except the data on average shows appreciation)
At the end of the day I don’t think you or Rebecca can say definitively that if you buy a home today, you will be able to sell it tomorrow for a profit. It takes hard data to prove that and the closest you can get is what has happened in the past.
The only thing that is certain and can’t be argued with is that home prices in Issaquah Highlands HAVE appreciated over time. If you can prove otherwise using real data, I welcome you to present it. Or if there is a specific set of data you would like to see to help you prove your point, I am sure Rebecca would be more than happy to pull it for you.
Looking forward to your response.
cheers,
jeremy
Jeremy, I think at some point we have to ask ourselves: what information do we hope to attain? If I’m a buyer today, a year ago, or 2 years ago, I want to know if my home has/will gone up or down in value. My opinion is that median statistics are useful only to a point - i.e. if you have a lot of data points, then they can provide you with a general trend; and even then, they are fraught with misleading aspects which we have discussed before. I think we can agree that literal same home sales gives us a much better idea of what has really happened. The Case/Shiller Index does just that - and the data is in: following the national trend, King County has now had several months in a row of negative appreciation (and even the C/S Index overstates appreciation because it doesn’t factor in improvements made to homes using home equity lines.)
Unfortunately, there is no C/S Index specific to IH. So we have to do what we can to best understand the situation. We know that inventories are way up, so right away, simple economics point to a down trend - i.e. an increase in supply relative to demand rarely means that prices are going up (for any good.)
You say the data show year over year appreciation…maybe. I say it shows that there were fewer transactions, and that the ones that did occur were at higher price points. You are right - it is hard to come up with pure apples-to-apples, an example being, our sample set doesn’t control for specific neighborhoods; as you know, the “average size” house can cost different amounts in different neighborhoods.
To directly address your other point about same house sales, assume that I mean a newer house in good condition. I think that will apply to most homes, especially in the upper Highlands. I’m telling you in all honesty that I believe my house is worth less today than it was one year ago (potentially a LOT less.) I also believe the condition is good, as I have improved it and also had contractors comment to me on how good my upkeep has been.
I feel the strongest about what you said here:
“At the end of the day I don’t think you or Rebecca can say definitively that if you buy a home today, you will be able to sell it tomorrow for a profit. It takes hard data to prove that and the closest you can get is what has happened in the past.”
I 100% disagree. I think I can say with virtual certainty that if you buy a house today (especially if you pay what they are asking), then you will take a loss…and you are a candidate for a severe loss. Again, keep in mind the massive fees when you buy AND when you sell…as well as closing costs and taxes. When you include all that, you are basically down 10% the instant you sign the papers. That means you need to make a gain of 11.1% JUST TO BREAK EVEN!!! And that’s only if it’s overnight; otherwise, you have to take into account the effects of inflation. And to get the opportunity to do this, you need to have tens of thousands of dollars in free cash for a down payment! Suffice it to say that I’m highly confident that it will take (many) years to get your 11.1% back.
You also say:
“The only thing that is certain and can’t be argued with is that home prices in Issaquah Highlands HAVE appreciated over time.”
I absolutely, 100% agree with you. In fact, that’s my point! Prices have gone up such a ridiculous amount that it now constitutes a bubble. If you don’t believe me, then go look at those little cottage homes on 25th and 26th walk behind the new condo towers. People bought those in late 2005 for $250-270K. They are 1240 square feet. That’s $217/sq foot. I believe some of them sold again in the early summer - before the mortgage market meltdown, for $420K or so…a staggering $338 sq foot!!! Now Jeremy, that is just beyond the pale. I know people renting those for $1500/month. That is literally half of what it would cost you to buy it now. The people that paid $420K are going to take MASSIVE losses. I would not be surprised at all to see those things come back down to the low $300’s. And those are literally tiny homes that I think we can agree qualify as “starter homes”. When that’s the case, there’s no way prices are going higher.
I also want to reiterate that I’m not saying that buying a home is a bad thing. Keep in mind, I’m a homeowner! I’m merely saying that buying a home AT THESE PRICES is bad. A simple perusal of Craigslist will show you that there a lot of very nice homes to rent in IH for good prices. Buying any of those homes would cost you money up front as well as 30-50% more per month to carry the loan. My advice is to take advantage of the great rental rates, wait it out, and then buy when the pain is the greatest. I honestly feel like you aren’t leaving anything on the table if you pursue that strategy.
“You say the data show year over year appreciation…maybe. I say it shows that there were fewer transactions, and that the ones that did occur were at higher price points. You are right - it is hard to come up with pure apples-to-apples, an example being, our sample set doesn’t control for specific neighborhoods; as you know, the “average size” house can cost different amounts in different neighborhoods.”
Just for fun, I looked at the data and separated homes by neighborhood. The results still hold true. The data is not skewed because of higher prices in different neighborhoods.
“I 100% disagree. I think I can say with virtual certainty that if you buy a house today (especially if you pay what they are asking), then you will take a loss…and you are a candidate for a severe loss. Again, keep in mind the massive fees when you buy AND when you sell…as well as closing costs and taxes. When you include all that, you are basically down 10% the instant you sign the papers. That means you need to make a gain of 11.1% JUST TO BREAK EVEN!!! And that’s only if it’s overnight; otherwise, you have to take into account the effects of inflation. And to get the opportunity to do this, you need to have tens of thousands of dollars in free cash for a down payment! Suffice it to say that I’m highly confident that it will take (many) years to get your 11.1% back.”
Sure, but the same thing is true with “virtual certainty” if you buy one share of stock isn’t it? Actually it’s not. You could have bought one share of Google stock the day it IPO’d and sold it the next day for a nice profit. But the chance of that happening is just about as likely as someone buying your house the next day for 50% more just because. It’s not impossible but pretty darn unlikely.
And regarding fees, yes they are high, but not 10%-11%. They are closer to 8.00% - 8.25% .
And I won’t comment on how long it will take to get that back because I think we both can agree to disagree.
Shaq,
While there aren’t any same house sales that represent homes that were bought and sold more than once between January 1, 2007 and today, here are some same home sales in the Highlands for homes that were bought as early as 2005 and resold more than once. The average of all these homes shows 15% change in price.
Hope this helps…
House 1
Selling Date 3/25/2005
Selling Price $404,990.00
Selling Date 11/14/2005
Selling Price $454,500.00
Change In Price 12%
House 2
Selling Date 9/29/2006
Selling Price $553,000.00
Selling Date 5/30/2007
Selling Price $610,000.00
Change In Price 10%
House 3
Selling Date 8/25/2005
Selling Price $449,950.00
Selling Date 9/14/2006
Selling Price $526,000.00
Change In Price 17%
House 4
Selling Date 9/21/2006
Selling Price $567,950.00
Selling Date 1/30/2007
Selling Price $715,000.00
Change In Price 26%
House 5
Selling Date 8/30/2006
Selling Price $580,000.00
Selling Date 8/31/2007
Selling Price $619,950.00
Change In Price 7%
House 6
Selling Date 9/9/2005
Selling Price $581,150.00
Selling Date 12/18/2006
Selling Price $619,990.00
Change In Price 7%
House 7
Selling Date 11/17/2005
Selling Price $559,950.00
Selling Date 4/6/2007
Selling Price $590,000.00
Change In Price 5%
House 8
Selling Date 11/15/2005
Selling Price $420,000.00
Selling Date 4/20/2007
Selling Price $480,000.00
Change In Price 14%
House 9
Selling Date 5/10/2006
Selling Price $439,950.00
Selling Date 12/8/2006
Selling Price $459,950.00
Change In Price 5%
House 10
Selling Date 4/14/2006
Selling Price $595,000.00
Selling Date 6/28/2007
Selling Price $620,000.00
Change In Price 4%
House 11
Selling Date 5/16/2005
Selling Price $750,000.00
Selling Date 12/27/2005
Selling Price $795,000.00
Change In Price 6%
House 12
Selling Date 7/10/2006
Selling Price $430,000.00
Selling Date 3/30/2007
Selling Price $444,000.00
Change In Price 3%
House 13
Selling Date 6/15/2005
Selling Price $443,500.00
Selling Date 8/24/2006
Selling Price $520,000.00
Change In Price 17%
House 14
Selling Date 7/8/2005
Selling Price $399,950.00
Selling Date 5/9/2006
Selling Price $679,900.00
Change In Price 70%
House 15
Selling Date 3/14/2006
Selling Price $599,900.00
Selling Date 8/23/2007
Selling Price $712,500.00
Change In Price 19%
House 16
Selling Date 1/27/2006
Selling Price $685,900.00
Selling Date 3/23/2007
Selling Price $750,000.00
Change In Price 9%
House 17
Selling Date 9/8/2005
Selling Price $724,950.00
Selling Date 9/14/2007
Selling Price $760,000.00
Change In Price 5%
House 18
Selling Date 5/10/2005
Selling Price $605,000.00
Selling Date 2/15/2006
Selling Price $645,000.00
Change In Price 7%
House 19
Selling Date 9/15/2005
Selling Price $504,900.00
Selling Date 1/23/2006
Selling Price $548,000.00
Change In Price 9%
Selling Date 4/26/2007
Selling Price $650,950.00
Change In Price 19%
House 20
Selling Date 9/29/2005
Selling Price $380,000.00
Selling Date 11/30/2006
Selling Price $434,000.00
Change In Price 14%
House 21
Selling Date 6/1/2005
Selling Price $313,000.00
Selling Date 1/31/2007
Selling Price $392,000.00
Change In Price 25%
House 22
Selling Date 8/29/2006
Selling Price $270,557.00
Selling Date 11/28/2006
Selling Price $351,000.00
Change In Price 30%
House 23
Selling Date 9/1/2006
Selling Price $337,100.00
Selling Date 12/21/2006
Selling Price $412,000.00
Change In Price 22%
House 24
Selling Date 4/26/2006
Selling Price $584,800.00
Selling Date 2/21/2007
Selling Price $729,000.00
Change In Price 25%
House 25
Selling Date 10/2/2006
Selling Price $625,981.00
Selling Date 12/8/2006
Selling Price $695,000.00
Change In Price 11%
House 26
Selling Date 11/3/2005
Selling Price $561,300.00
Selling Date 3/29/2007
Selling Price $720,000.00
Change In Price 28%
House 27
Selling Date 2/16/2006
Selling Price $608,994.00
Selling Date 9/8/2006
Selling Price $606,034.00
Change In Price 0%
House 28
Selling Date 6/8/2006
Selling Price $709,900.00
Selling Date 7/13/2007
Selling Price $796,000.00
Change In Price 12%
House 29
Selling Date 11/9/2006
Selling Price $713,722.00
Selling Date 10/1/2007
Selling Price $722,000.00
Change In Price 1%
Shaq,
I also wanted to mention that the home you referred to on your street. If it is the one I am thinking of, while it has some lovely features, the floor plan is off.
This is not just my professional opinion, but that of three different clients I have taken through the home as well.
The flow of a floor plan has a huge impact on the marketability of a home. If a home doesn’t flow - even if it has beautiful bells and whistles it won’t sell.
Thanks for those specific stats, Rebecca. I think they depict pretty accurately what we have both been saying:
a)prices have gone up here…A LOT!
b)prices have basically stopped going up since the freeze in the credit markets in late July/early August and have started going down.
Do you have more info on house 29? I think that’s a perfect example. It’s YoY Q4 to Q4, only up 1%. Of course, I’ll bet there were some substantial “concessions” that aren’t reflected in that sales price. I also would be willing to bet that it would have sold for more in June than they ended up getting in October. And finally, I think we can agree that the original buyer lost money on this transaction when you consider fees, taxes and any improvements they may have done(in fact, you’ll see that the excise tax alone of 1.875% completely eats through the “appreciation.”)
One other thing to be aware of is situations like House 25. It looks like a big gain was taken in 2 months, but obviously the purchase price is as of a much earlier date. This happened on our house, in fact. We signed in Jan 2005, but didn’t move in until Jan 06, which is the record date.
Man, those stats are really interesting. I’ll have to look at them more later. Thanks again!
Also, do you have any knowledge of those cottage homes I mentioned on 26th Walk? I was agape when I saw what was going on there.
Shaq-
What other info would you like on house 29? Let me know and I will try and dig it up for you.
As for the homes on 26th Walk - while I think they are nice,I still think of them as a condo alternative. While someone might pay that kind of money for 1200 square feet in Seattle, I think that it is probably a bit much for the burbs - even in our wonderful community. It will be interesting to see where the price falls once it sells.
House 29 - just where it is, when construction actually was begun on it, what kind of condition it’s in, etc.
I will acknowledge that the homes on 26th Walk do come with detached 2 car garages. There is some value in that, but certainly not $420K worth! It just saddens/angers me that that’s the message that’s sent to people in the starter home market.
[…] a previous post on the appreciation in real estate prices that Issaquah Highlands has seen comparing 2006 to 2007, I showed some data on the resale’s that had occurred in […]