On a recent vacation to Maui we drove past this road sign located south of Makena. The sign places the driver on notice to expect the unexpected. After all, unless the driver has physic ability there is no way to know if a car is coming up the hill in the opposite direction on the one lane road because as the sign says the hill is blind.

I could not help but make an analogy with regard to the present economic recovery and how it relates to real estate. In many ways forecasting the future real estate market is a blind one lane hill.

The real estate markets in the South Sound appear to be in the early stages of recovery. After a round of deflating values in 2009 housing prices appear to have stabilized this summer. Now the pundits and media talking heads are predicting more trouble in the form of slower sales activity and further erosion of home values. Why? Primarily because homes sales on a national level dropped in July and because the rate of unemployment remains high by historical standards.

Going forward I see two metrics that could significantly affect the market. If interest rates were to significantly increase the market would be affected as fewer buyers would qualify for mortgages and secondly higher unemployment would impact economic stability as it did in the early 1970’s and 1980 recessions.

The reality is that interest rates remain at historical lows. With interest rates in the low to mid 4% range purchasers can buy a home in Mason County valued up to $190,000 with a monthly payment equal to rent for an equivalent home. Interest rates are at bargain basement levels. Secondly, home values have dropped making buying a home even more affordable than ever before.

The amazing thing is nothing has really happened in the real estate market over the past 90 days to change it one way or the other. The forces that spurred the present day early stage recovery – great long term interest rates and lower home prices, remain unchanged. How newspaper columnist, economists and bloggers can predict the market is beyond my comprehension. Their predictions of market demise during the late months of summer could become a self fulfilling prophecy - but I think great prices and super low interest rates will win the day.

There is no clear vision of the future real estate market in this case as there is a blind one lane hill ahead with the economy. The past has taught us that when most others are selling and the mood is negative – it is the very best time to buy.

As Winston Churchill said “It is always wise to look ahead, but difficult to look further than you can see”.

Here are some statistics for the past 20 days for all of the Mason County Market

• 21 closings (only one per day!)
• Average sales price $256,910 (previous 20 days was $179,300!)
• Average days on the market – 210 (yuk)
• Lowest price sale = $47,000  Highest priced sale = $608,000

Kathy was ready for the sales hoard. She stepped forward and took the lead as we were double teamed while viewing the prospective Civic. Kathy asked questions, lots of questions. Before long – wham! One of the sales people went down and scurried back to the dealership to find the answer to a question he could not answer. The remaining salesperson battled gallantly. Although Kathy tried not to let on he knew instinctively that we were not going to buy a car that day. When Kathy’s questions descended into the “what’s the bottom line price on this car territory?” the salesperson was thoughtful. Finally he replied “some people get analysis paralysis when shopping for a car”

My first thought was to laugh out loud but I held my stony facial expression not wanting to anger my bride. Although the salesperson had won the battle with that statement he had lost war. We exited the dealership quickly after that.

As we drove away I could not help applying the salesperson’s analysis paralysis observation to the real estate world and my own experiences over the past six months.

Never have I seen so many ripe buying opportunities. The market is at the bottom of the cycle with interest rates at an all time low – hovering around 5%. Sellers, like our car salespeople, are in the corner beaten and bloody. Home values in the south sound are down 10% to 20% depending on the price range. Land values have plunged even more, down 30% to 40% in most cases. 5 acre tracts that were selling for 175k pre-crash sell for 85k at present. These numbers are well documented. I’ll spare you statistical page for the moment.

Yet as I write this – buyers for the most part are on the sidelines. Sales are steady but definitely not at levels that we could label as good. Land sales are downright slow. All this in what in my humble opinion is the best buyer’s market since 1985.

Web site hit statistics on Keithfuller.com and Windermere.com are at an all time high. Buyers are watching and investigating listings. Buyers are eagerly analyzing available statistics such as price per square foot (a statistic that works well in subdivisions with identical homes and lots but is useless otherwise), sales price vs. asking price percentages and county assessor’s assessed values (don’t get me started on that one). Zillows Zestimates are consulted and considered. These stats and metrics are all great tools but the bottom line is that the best time to buy is when there the market is down and when other buyers are on the sidelines waiting for the overall market psychology to change from negative to positive and by the time it does it is too late. As with the stock market – the most profitable time to buy is in a crash or immediately after – not when the talking heads are waxing market positives or the day of a 200 point improvement in the Dow.

Prices are already at lows, interest rates are at lows, there is an ample supply and the market is rich with repos and unwanted properties. Is it possible that many current qualified buyers have analysis paralysis and are waiting for a better opportunity to jump into the market?

The caller was my buyer informing me his spouse did not have time to meet with me and could we reschedule for next week. My first thought was my buyer’s got cold feet and changed their mind about their humongous purchase. However time in and time out I am reminded that in this extreme buyer’s market the buyers have all the leverage and the sellers, well the sellers had there place under the sun a couple years ago and they are presently at the mercy of buyers in an extreme way. My buyers are typical. They have planned, they have saved, they have sacrificed and they waited. Waiting four more days only gives them more leverage and more space. They don’t have cold feet at all. They have a strategy.

After my appointment, about 30 minutes later as I approached my car I met a neighboring property owner named Wendy (a generic name –not my wife or sister though). Wendy was slightly agitated and ask me “have you seen a shop vac?” I replied “sure – I found one in the ditch and I put in the back of my Lexus”. To that Wendy cried “get it out – get it out now! It’s full of snakes!” I reach in the back and pulled out the shop vac and once again popped it open. At first I did not see anything but then in the sunlight I spied a little movement. That little shop vac was full of baby garter snakes. Kathy proclaimed “I had snakes in my garden and I did not know how to get rid of them so I sucked them up and threw the shop vac in the ditch”. The ditch where I found the shop vac was over 250’ away from Kathy’s house. By this time I was laughing really hard. I said “you mean to tell me you sucked up all those little snakes and brought that vac clear down here and just abandon it?” “Yes – yesterday” she replied. I thought I was going to die laughing. At that point I took the shop vac into the nearby woods and set the little creatures inside free. They looked a little dehydrated but I’m sure they’ll survive the ordeal. It was a bittersweet moment for me. I relinquished my treasured shop vac find but saved several little lives in the process. As I drove up the road I had to wonder if any of those little guys had crawled out the vacuum tube while the shop vac was squirreled way in my car. I began to itch and then to laugh. –Just another day in real estate.

My first year selling real estate was 1977. The USA was emerging from a recession and the real estate markets were great. Folks clamored to own a piece of the rock and Mason County Washington was in the growth mode. The party lasted until mid 1980 when inflation exceeded reasonable limits and the Fed applied a high interest rate tourniquet on the economy stalling growth to break the back of spiralling inflation.

In those pre-fax and pre-internet days foreclosures were rampant in Mason County with Fannie Mae, Freddie Mac, HUD, VA and a handful of local banks taking possession of most of the foreclosed homes and land. The real estate market stalled completely. With interest rates topping out at 16.5%, I sold just 5 homes in 1984. The situation was bleak then but eventually interest rates dropped and happily the market returned to those that stayed the course.

Fast forward to 2006. In some areas of the United States the real estate market began to show signs of trouble. Home prices in some locales of our country reached inexplicable levels. Markets were driven into frenzy by speculation enabled by easy financing and it was rare when a buyer didn’t qualify for a mortgage loan. Only folks just emerging from a recent bankruptcy did not qualify. Similarly to 1980, home and land prices inflated at an unsustainable annual rate but the similarities to 1981 ended there with the Consumer Price Index (CPI) remaining relatively flat (in the 3% range).

In 2009 we find ourselves in a full fledged real estate led recession which has and is spilling over into all corners of the US and world economy. This recession is extremely complex in nature due to the creative and often abstract financing and leverage tools used to create this situation.

The Puget Sound Business Journal is currently running a series of articles which illustrate just how complex the current mortgage mess is. In the PSBJ article a Seattle area family is faced with a frustrating combination of joblessness, over leverage, a deflating home value, and two incoherent lenders that don’t communicate.

One promising option that exists in 2009 that was unheard of in the 1980’s recession is short sales. I will talk more about this option in later blogs. Short sales are where the lender and/or lenders accept less than a full payoff upon the sale of a home with excessive mortgage debt.

To our credit much is being done on a governmental level to right this failed financial mess. First, interest rates are hovering around 5% enabling home buyers left standing to take advantage of deflated home values. The federal government has taken extraordinary steps behind the scenes to insure mortgage financing is available to those that qualify. Gone are the days of 100% conventional financing to those with unverifiable incomes or credit scores below 620.

Secondly congress passed legislation which will facilitate thousands of homeowners that are currently not severely delinquent on home mortgages but facing future trouble to modify their home mortgages hopefully avoiding a short sale or foreclosure. See FinancialStability.com for details.

Finally congress passed legislation granting those buyers that have not owned a home in the past three years a whopping federal tax credit of up to $8000.00. That last move seems to have brought first time buyers out into the market. Sales starts for homes under $170,000 have picked up significantly in the Shelton area.

In addition to all of the government action mentioned above I believe there is another factor that is quietly at work that will expedite a recovery. That significant tool is technology. In this Blackberry age of lightspeed there is no denying the invisible role technology played in assisting us into this predicament but will play an even larger role in both assisting us back to our feet and preventing a  meltdown from occurring in the future.

Unlike the days of the 1981 – 1985 recession - money, records, information of every kind travel instantaneously from point to point. As witnessed by current government action, solutions, policy changes, even financial band aids can be applied in hours. Government will need to take great care not to abuse this access through overreaction to the daily problem du jour.

We find ourselves this spring at a unique crossroads. All home and property owners are affected by the tremendous changes taking place in the real estate markets. Experience has taught me that now is the time for financial prudence, and careful conservative decision making (not meaning politically here necessarily). Tough choices need to be made by all levels of government and property owners alike. Real estate will remain the largest investment most of us will make in our lifetimes and although the future is unclear history shows that recovery is on the way.

In summury Stan Laurel’s reply to Ollie in the appropriately named movie the The Fixer-Uppers (1935) was “Well, here’s another nice kettle of fish you pickled me in!”

Those of you that know me well understand that I struggle with being succinct. In the future I will make every effort to get to the point and keep the word count down to a reasonable level. If I can assist you with your real estate needs please do not hesitate to give me a ring, send me a text, drop me an email, or simply drop by my office and visit with Kim, Bethany and myself.  We’d love to see you. -Keith