According to the Zillow Q2 Homeowner Confidence Survey 62% of homeowners believe their home’s value has increased or stayed the same in the past year yet 77% of U.S. homes actually declined in value.

This contrast of reality and wishful thinking is less pronounced in the West, perhaps because in parts of California and Arizona the signs of the downturn are just too prominent to be ignored. As always, the Northwest is lumped in with the rest of the West, so the company that conducted the poll for Zillow provides no data for our corner of the USA.

Signs of Denial in the Seattle Real Estate Market

To find signs of this denial let’s take a look at the Property History of the listings in the data base of the Northwest Multiple Listing Service (NWMLS). The Property History captures the price trend of every property from when it was listed to when it was sold - if and when and how often and by how much the price was reduced. What is used in many published statistics is the spread between the listing price (at the time of the offer) and the purchase price. However, that tells only part of the story. The listing price at the time of the offer is often lower than the original listing price (first day of listing). Another price factor - not reflected in the selling price - is other seller concessions, such as the seller paying part or all of the buyer’s closing costs. Let’s look at a typical example:

Some numbers tell only part of the story.
The media will report statistics that reflect the difference between the listing price and the selling price. The real story, however, is told by the difference between the original listing price and the selling price. This real story tells the difference between a seller’s hopes (unrealistic expectations) and the reality of the market. In the example above the seller reduced the price of the home by 3.3% and then sold it 2.5% below the reduced price, making for a total price reduction of 5.8% since the original listing. If the seller paid $6,000 of the buyer’s closing cost then the total price reduction was 7.1% (difference between $450,000 and $418,000). Such seller concessions and these kind of price reductions are representative of what is currently happening in the Seattle real estate market.

Only Motivated Sellers Need Apply
As a real estate agent it is my job to sell your home at the highest possible price. Some would add: “in the shortest possible period of time” but that depends on the circumstances. Still, if you do not want to sell quickly as possible why do you want to sell at all? This is no time to “test the market” just to see what you could get. I know of a street with three similar homes for sale. One of them is priced about 35% lower than the other two. One of the overpriced homes is listed with a comment by the agent: “price set by seller.” In other words: don’t blame me.

The price of the “inexpensive” home reflects the market. After 30 days it is listed as “Pending Sale BU” which means Backup Offers Requested. I don’t know what the offer price is but it is a safe bet that someone spotted a good value and is now trying to get an even better deal.

Until the early 1980s there was only one agent:
the Listing Agent. Buyers thought they were represented by the listing agent when, in reality, they weren’t represented at all. When we bought our first home in 1982 we knew nothing about real estate. The agent was a nice guy and it looked to us as if he was “on our side.” He wasn’t.

Now, some 25 years later,
many people, especially first-time buyers, know as much about real estate as I did back then. And, while “buyer agency” started in the early 1980s, the concept of being represented as a buyer by an agent devoted entirely to the buyer’s interest still needs to be explained and promoted.

Expunge the term Selling Agent
from the real estate vocabulary. Use instead the term Purchasing Agent, a term widely understood by anyone who’s ever dealt with business.

Business dictionaries describe the role of a Purchasing Agent as:

1. seeking reliable vendors or suppliers to provide quality goods at reasonable prices
2. negotiating prices and contracts
3. reviewing technical specifications for raw materials, components, equipment or buildings
4. determining quantity and timing of deliveries

Translated into the real estate business, the Purchasing Agent:

1. seeks to find quality real estate at reasonable prices from reliable sources, such as other agents or private sellers
2. negotiates prices and terms of purchase and sale agreements
3. reviews features and examines, with the help of other experts, the soundness of property and
4. ensures that transaction moves forward in a timely manner according to the contract and closes as agreed.

Purchasing Agents
are used in business where either price or quantity or both are significant and where an individual with special product expertise can save a company money or otherwise add value to the transaction. Purchasing real estate is for most people the highest value transaction and to engage a purchasing agent with special expertise makes sense.

When the time comes to hire an agent
to help you find a home or condo ask the agent to give you a job description for what he or she will do for you. What IS the special expertise? Where’s the value for YOU? The last person you want to hire is an agent who want to “sell you on a property.”

Terminology is local
The term Selling Agent is used in Washington State and elsewhere across the USA. A website, calling itself the Real Estate Dictionary gives this definition of Selling Agent: “A real estate broker or salesperson who writes the purchase offer for a buyer in a real estate transaction, but may not actually represent the buyer.” WRONG in this part of the world and evidence for why the term Selling Agent should be eliminated.

A Sense of Anticipation: We are moving to Seattle!

The move may be months away but pictures of distant homes for sale are being forwarded to relatives and friends. “Look where we could be living in Seattle!” Several real estate agents receive emails from what looks to them like a promising prospect. “We are relocating to Seattle; can you send us some more information on this home?”

The Reality: the Transferee’s Relocation is Being Outsourced.

Elsewhere, in the other world - the real world of corporate relocation - company policies and procedures on relocation determine what happens next. The relocation of an employee is an outsourced activity delegated to a relocation management company which handles every aspect of the relocation and, most importantly, the cost of the relocation.

The Reality: Relocation is Expensive and Costs Need to be Managed.

According to Worldwide ERC (formerly Employee Relocation Council), the current, average cost of a domestic relocation was for:

• Current Employee Homeowner $62,185
• New Hire Home Owner $55,165
• Current Employee Renter $18,365
• New Hire Renter $16,177

According to ERC, of the nearly 400,000 transfers generated by ERC member companies, 1/3 are new hires and 2/3 are current employees and 54% are home owners while 46% are renters. (ERC provides no data for international relocations but we can safely assume that the costs are higher.)

Managing the Cost Means Managing the Transferee

It’s understandable that relocation management companies are charged by their corporate clients to manage these costs. The sooner the transferee can become a productive employee the better. The less the transferee has to worry about logistics and life outside work the more likely the transferee will be productive.

Thus, many relocation management companies like Cartus (formerly known as Cendant) hire destination consultant companies like Full Circle that ensure the smoothest possible “settling in” of the transferee. When dealing with international relocations the destination consultants are dealing with visa issues, opening bank accounts and obtaining social security cards - activities that require considerable knowledge and expertise. In the end, this expertise benefits the transferee and saves the employer money.

Reducing the Cost of Relocation by Turning an Expense into Income

If the relocation involves real estate - selling and/or buying - relocation costs are “shifted” from Cartus and the corporate client, such as Microsoft, to companies and individuals involved in the real estate transaction.

Here’s how it works. The relocation management company works with select real estate brokers who assign agents to work with the transferee. For that privilege, the agent pays a referral fee - up to 40% of the real estate commission - to the relocation management company. If the transferee sells and buys, this happens twice.

Controlling the Process

In the case of Cartus, the preferred brokers are the ones that are owned by Realogy, the parent company of Cartus. The Realogy Franchise Group consists of well-known real estate companies, including CENTURY 21® and Coldwell Banker®.

A link on the Realogy’s website leads to the Title Resource Group (TRG) which “…is a full-service title and settlement services company” that …”serves real estate companies, corporations and financial institutions in support of residential and commercial real estate transactions”…”TRG is a nationally managed family of companies operating under well-known, local brands.” On the fact sheet it says that “TRG is as an integral part of the Cartus Asset Recovery Program.” Expense recovery may be more accurate.

The Internet Interferes with the Process

Back to the beginning: the transferee and any “significant other” are intelligent, internet-savvy individuals. They would like to have a say in the selection of the real estate agent. To them the choice of neighborhood and schools should not be left to someone chosen by corporate relationships. The transferee may have found an agent who speaks her language and knows the difference between living in Munich and Seattle because the agent has lived there himself. The transferee may also want to be the one to choose the mortgage lender since this is a major financial decision which requires a great degree of trust which can only be found in a personal relationship. Neither the purchase of a home nor the financing should be treated as a commodity.

The Transferee Has a Choice

Many transferees don’t know that they have a choice because the relocation process is not as transparent as it should be. In most cases, all a transferee has to do is to make her/his desires known to the employer and/or the relocation management company who then will have the transferee’s choice of broker/agent sign a referral agreement. This agreement allows for part of the commission to be paid back as a referral fee at the closing of the real estate transaction.

Possible Conflicts

What if the broker/agent refuses to sign the agreement and the transferee insists on choosing the agent? What if the agent is a long-time friend of a transferee who is moving to another city? Can the relocation management company insist on the referral fee “after the fact?”

Tortuous Interference and RESPA Issues

After-the-fact-referral-fees are not a recent issue. An article in Realty Times, published first in 2000, stated: “Tortuous interference is the interfering by one real estate licensee [broker/agent] with a contractual relationship between another real estate licensee [broker/agent] and their client. This is a violation of license law in every state. This law is broken every time a relocation company speaks with a transferee or the transferee’s agent about a referral fee after a contractual relationship has begun.”

The same article also raises concerns with RESPA - the Real Estate Settlement Procedures Act: “…unjust enrichment is a RESPA law violation and is reportable to the Department of HUD [Housing and Urban Development). RESPA regulations are such that no fee can be charged, received or paid in a real estate transaction without due cause. In other words, any fee charged must be earned and deserving in order to be paid or received.”

Centralized Management vs Transferee Choice

The best relocation practice takes advantage of the valuable services of relocation companies and experts while respecting the transferee’s right and desire for personal service. If YOU have been transferred, what has been YOUR experience?

Share it with others on SERENE where you will be heard and seen.

Not so fast, I say. It’s an OK time to buy if you do not have to sell first. It’s a good time to buy if you don’t have to sell first and have good credit. It’s a great time to buy if you don’t have to sell, have good credit and have saved up for this very purpose.

If you are young, have a well-paying job and would find another job in greater Seattle with relative ease, this is your day to go house hunting - eh, make that condo hunting.

Know what you want; then make a list.

Condo hunting - that’s just what I did with a young man who fits the above profile. Beginning about a month ago, we started to look around, first online, then in the real world. Shawn had a pretty good idea of what he wanted. He made a list for me:

1. Must Have (maximum 25-minute no-transfer bus ride to work),
2. Would Like (lots of light, neighborhood feel),
3. Don’t Need (amenities like pool, gym) and
4. Cannot Have (previous owner with pet - allergic).

Do yourself and your real estate agent a favor and make your own list. In the end, we found a condo that met 3 of the 4 criteria. The seller has a dog but there are no carpets; just hardwood floors and a central vacuum system. We made an offer and, after some back and forth, we arrived at a mutual agreement on price and conditions.

Imagine a day in your life.

What I tell all my buying clients is to imagine how they spent their time. What do you do after work? Cuddle up with a book or go bar hopping? Do you like to have friends over for meals or rather go to a restaurant? What do you do on weekends? In Shawn’s case one such lifestyle consideration was where his friends lived. Some live on the eastside some south of downtown Seattle. The chosen condo put him right in the middle.

Eastside or Seattle?

We started on the eastside at the southern edge of Bothell with lots of condos within walking distance to the Brickyard Park & Ride. Shawn took the bus from work in Seattle to meet me there - the commuting test. We saw about half-a-dozen condos that late afternoon and early evening. In the following week I picked up Shawn with my car after work and we looked at condos in several Seattle neighborhoods - Fremont, Maple Leaf, Sandpoint, Lake City to name a few.

If you are wondering about the number of condos currently on the market, here’s the count from the Northwest Multiple Listing Service (NWMLS).

1-bedroom condos between $150,000 and $200,000

• Seattle (city limits): 67
• Kenmore, Bothell, Mountlake Terrace, Mill Creek: 33
• Kirkland, Bellevue, Redmond: 24

2-bedroom condos between $200,000 and $250,000

• Seattle (city limits): 64
• Kenmore, Bothell, Mountlake Terrace, Mill Creek: 48
• Kirkland, Bellevue, Redmond: 42

Online real estate is like reading a menu; you can’t “taste the place.”

What Shawn learned from looking at over a dozen condos was that you can’t tell by the pictures what a place is really like. What I learned again is that pricing real estate is at least as much art as it is science. Too much depends on the owner’s motivation to sell. Residential real estate is not entirely rational. The web is full of information but the smell of a place is something else altogether.

What’s your take?

What’s holding you back from owning your own place? What’s your idea of the ideal condo? What’s your preferred neighborhood and why? Have rising gas prices changed your mind as to where you would like to live? Your thoughts and comments are welcome.

So, what’s the big deal, you ask.

Big deal because you, too, are a “Potential Distressed Home Owner” if you

1. Are at risk of loss for non-payment of property taxes,
2. in default under a mortgage,
3. 30 days behind on mortgage - OR
4. believe that you could default on your mortgage within 4 months and tell your lawyer, real estate agent, lender, mortgage or credit counselor, etc.

The bill has many flaws,

such as point 4 in the list above, vague wording, and sweeping definitions, but there are two major flaws worth noting. To be a Potential Distressed Homeowner you must be

1. occupying the property,
2. the property must be your primary residence, and
3. this property has from 1 to 4 residential units

Anything missing here?

Yep, the Distressed Property Law does not cover any building with more than 4 units, which excludes almost every condominium complex.

What makes this an important flaw, you ask? Well, the purpose of HB 2791 is to protect residential property owners in Washington from those shady characters who are preying on the distressed home owner. It is to protect them from con artist who “skim equity” and “steal homes”.

Since a good number of first-time-buyers buy condos and since some of them financed their dream with questionable mortgages this leaves a whole lot of targets for the scam artists to pursue.

The other major flaw

of the bill is that it does not exempt real estate agents. (In other states that passed similar legislation, real estate agents are exempt,) It is not that real estate agents are necessarily better than the average person, but they are already covered under other legislation, namely RCW 18.86 which governs real estate practice.

The bill creates a whole new profession: the “Distressed Home Consultant.” That new label was meant to apply to legitimate foreclosure specialists and scam artists. It now also applies to real estate agents. The bill does exempt others equally likely involved in real estate transactions: lenders, mortgage brokers and lawyers.

These two flaws may be major but this one beats both.

Each bill that becomes legislation includes a “Fiscal Note” which states the estimated Fiscal Impact of the bill - that’s the impact on the budget, I suppose. And since that budget is paid for by our taxes that means the fiscal impact on you and me. According to the math wizards in Olympia, the Distressed Property is estimated to have “No Fiscal Impact.”

No Fiscal Impact? Let me count the ways.

The bill has resulted in numerous rewritten and newly printed real estate transaction forms. It has already created and will create more confusion and waste of time for anyone involved in buying and selling a home. That includes all the aforementioned potential distressed home owners. The worst and most costly impact of this bill will be this: Every sane real estate agent will stay miles away from anybody suspected of harboring thoughts of being a potentially distressed home owner. The potential liability to be sued is simply too great. Ultimately, this bill may achieve the opposite results of what was intended: more foreclosures and more bankruptcies. The shady characters meant to be deterred by this bill will find other ways to ply their trade. Most condo owners remain unprotected and should watch out.

Much has and will be written about this law.

Here’s how a real estate foreclosure specialist (now becoming my Distressed Home Consultant colleague) views this bill. Your comments are welcome.

Ready and Qualified to Buy their First Home

Both couples share a trait that is becoming rare these days: save before you buy and then buy less than what you could afford. Needless to say, it is a treat to negotiate a deal for buyers like that.

What and Where?

Having determined the basic minimum specifications - 3 bed, 2 bath, 1,500 sq ft, 2 stories, small yard - and what was comfortably affordable and with pre-approval in hand, we started the search online. To help in choosing the right Seattle eastside neighborhood I suggested that they imagine a work day and a weekend - getting up in the morning, commuting to work, taking a toddler to day care, taking a walk, doing errands, going out to dinner, having friends over, etc.

Old or New, the Prices are Down

Before setting off for the Highlands we looked at a home south of downtown Issaquah. Built in the early 80s, vacant and on the market for months, the best property feature was the size of the lot with a sizable, mature back yard. We decided that any offer would be at least $35,000 below the asking price; money needed to upgrade the kitchen, bathrooms and remove the popcorn ceilings.

To save gas we left one car in downtown Issaquah and drove across 1-90 at exit 18 and up Highland Drive. Over the course of two hours we saw the eight homes on our list and two more we came across by chance. Seven of the eight homes were priced between $480,000 and just below $500,000; only one was listed close to $525,000. Looking at the homes’ listing histories, it was clear that $500,000 had become the “high water mark” - five of the eight homes had once been listed over $500,000 before being reduced below that mark. The most extreme was a home that was reduced over the course of 140 days by 11.1%, from $540,000 to $480,000. The Zillow.com chart above illustrates the one-year price trend for Issaquah and the 98029 zip code which includes the Issaquah Highlands.

Keeping Count and Picking the Winner

Looking at several homes in short succession can become confusing. My method to keep them apart and memorable is to give each home a name, usually a distinctive feature. In our case, we named the three favorites “Stairs in the Back,” “Buy Three, get Four,” and “Secret Garden.”

In my opinion, Secret Garden is the clear winner. At $254.40 per square foot the least expensive, by location it is in the quietest neighborhood, yet closest to the Park & Ride. Built in 1999, it is the oldest of the three. But how else can you get such a beautiful garden with roses and clematis and enjoy your barbecue hidden from view by mature vegetation?

Looking for Alternatives

I searched the Northwest Multiple Listing Service website for homes in Redmond, Bellevue, Kirkland and Sammamish with matching criteria: built between 1999 and 2008, 3 or 4 bedrooms, up to 3 bathrooms, between 1,900 and 2,000 sq ft, 2-stories, minimum of 4,500 sq ft lot, and 2-car, attached garage. The result: zero.

Expanding the age of the homes back to 1995 made no difference. Eliminating the lot size specification entirely and reducing the required square footage to a minimum of 1,500 sq ft resulted in nine properties, three on the Redmond Ridge and six in Sammamish. The least expensive is a $424,950 Sammamish home with 1,550 square feet. However, languishing 138 days on the market and located deep in the heart of the Sammamish plateau it is a tough commute and perhaps not such a good deal.

If you consider selling your home on your own, envision this scenario: A friendly, well-spoken stranger wants to see your home. You invite her in. She compliments you on your home and asks to take some photos so her husband, away on business, can see the pictures online. You are flattered and have no objections. In fact, the prospective buyer has just taken pictures of some your most valuable possessions. If you have a security system, she may have taken a picture of the motion detectors and the security key pad in preparation for another, perhaps less well-intentioned visit.

Safety is always on the mind of a real estate professional. Alerts are posted on the Multiple Listing Service member website which reports suspicious activites. Thanks to these alerts, several suspects have been identified by police before more damage was done.

For Sale By Owner Sellers (FSBO) may be ignoring safety risks.

The FSBO seller likely lacks formal training in personal safety and is not experienced in dealing with complete strangers. Seemingly innocent questions by a “potential buyer” may be designed to find out who is at home and when the home may stand empty. The contents of the home can be at risk and, worse, so can be loved-ones, including children.

What’s the best protection for the FSBO? First, don’t be “home alone” when the stranger comes calling. If that’s not possible let someone else know when you will be showing your home. Have the visitor sign a guest book and ask to see identification. Equally important: don’t advertise the home as “vacant.” Other safety precautions include removing prescription drugs and valuables, such as jewelry. Eliminate evidence of personal contacts, such as which school your children are attending. Remove those photos and notes from the refrigerator door! Visit the National Association of Realtors website for more information on safety for home sellers.

Safety is KEY

Licensed real estate agents and their clients benefit from the security system managed by the Northwest Multiple Listing Service. The system records every entry and identifies all agents who have entered a property. A critical element of the system is the daily update of the agent’s access code on a GE Supra DisplayKEY™ or similar device which opens the lockbox via infrared signal. If not updated, the code that allowed entrance into a home yesterday will not work today. The lockbox, located near the entrance of a home, can be programmed by the listing agent to suit the home owner’s schedule.

Every time the lockbox is unlocked and the house key(s) become available the safety system records the agent’s identity and time of entry. The listing agent can access the information to confirm this information not only for safety reasons but to gain valuable marketing information which allows immediate feed-back from all agents that have visited the home for preview or with their clients.

The Northwest Multiple Listing Service (NWMLS) Takes Safety Seriously.

The keybox safety system protects real estate agents, home sellers and buyers. Through their listing agent sellers will know exactly who’s been to their home and when.

A $5,000 Fine

The NWMLS takes safety serious. Using another agent’s Supra DisplayKEY™ or Supra eKEY™ key to gain entry to a property is a violation that carries a $5,000.00 fine.

Getting more complex over time.

The state legislature keeps adding and changing Form 17. The last major change was in 2003. Subsequent effective dates and changes/additions pertained to:

• January, 2005: sex offender in area
• June, 2005: proximity to farms
• June, 2006: farm proximity language changed
• June, 2007: environmental section added plus other major changes

Major changes include:

• Definition and destinction between improved and unimproved residential property
• Amends the existing Form 17 used for “improved” property
• New Seller Disclosure Statement to be provided to buyer of “unimproved” property zoned for residential use
• Limits a Buyer’s ability to waive receipt of either form

Changes to sections of the form include:

• Section 6 – title of section changed from “Common Interests” to “Homeowners’ Association/Common Interests”.
• Section 7 – title of section changed from “General” to “Environmental”. This section must be provided to the Buyer, and receipt of this section cannot be waived by the Buyer, if the answer to any question in the section is “yes”.
• Section 7(D) – replaces old questions related to flooding with new question asking about existence of shorelines, wetlands, floodplains, and critical areas on the property.

Who must provide Form 17?

The requirement is getting tougher. Not having occupied the premises is likely no longer a valid excuse. One exception remains: when the owner has passed away.

What if the Seller does not provide Form 17?

The buyer can walk away from the purchase just before closing and get the earnest money back.

What’s the role of the real estate agent?

The agent can not assist the seller in filling out the form. The buyer acknowledges this by signing below a statement that reads: “…the disclosures made herein are those of the seller only, and not of any real estate licensee or other third party.”

Must agents disclose what they learn from Form 17?

Once the Form 17 has been provided to the buyer the answers become known to the real estate licensees representing the seller and the buyer. Having learned of material facts through Form 17, the real estate licensees must disclose them.

I am not using an agent to sell my home. Do I need to provide Form 17?

Absolutely.

If you are interested in the details of the new content and rationale behind the changes to the Washington State Seller Disclosure Statement, visit the Washington State legislature website (pdf file).

(Note: this is an update of an article I wrote more than a year ago for my website GNADE.com .)

Although the Seattle real estate market has cooled off since 2006, condo conversions are still an attractive option for first-time home buyers. With good reason because often it’s the only affordable option.

Over the past four years, developers have plucked one eastside apartment complex after another from the Seattle eastside landscape and created new real estate for sale. Some of the more recent conversions are in or near downtown Redmond, such as the Riverwalk at Redmond - built originally in 1983, The Boulder (1985), and the Bella Vista (1981). A conversion in progress is the Champagne (1969) in Bellevue near 148th on NE 8th Street.

Option packages and earnest money

First, the dollar figure advertised is usually just the “base price.” Option packages can add anywhere from three to ten percent. Some sellers ask for half of the option package price to be paid at the time the buyer and the seller have a “signed-around” purchase and sale agreement . This option package down payment is often not refundable. The earnest money itself can be steep, especially at the beginning of a conversion project.

Potential hurdles

The tenants (lessee) rights are protected by their lease contract and they will usually vacate the premises at the end of the lease. This means that a complex is not necessarily being converted in the most logical fashion.

In the current credit market it is hard enough to find a lender. The number of lenders for conversions is already limited because the condos are “non-warrantable” with the Department of Housing and Urban Development (HUD). Often, the seller advertises a preferred lender and, in addition, offers other financial incentives for buyers using that lender.

Find out the details; then get involved.

The conversion usually involves the gutting of the interiors, new flooring, new interior build-out, new doors, painting, trim, finishes, fixtures and appliances. Because in a condominium complex a buyer also buys a percentage of the common areas , it’s important to know exactly what’s being improved or converted .

I recommend to my clients to join the Board of the Home Owners Association at least for the first year. That way they can play a role in revising the initial rules of the association, such as allowing pets and designating visitor parking.

Buyer Beware!

Given the special circumstances of condo conversions is precisely why a buyer should be represented by an agent . In the more buyer friendly market of 2008, some developers/sellers are now advertising “agent friendly,” meaning we “need you to bring the buyers.”

Investing in conversion condos

The many condo conversions have contributed to increasing rents in the Seattle area . So buying a unit in a condominium conversion project with the idea of renting it out may be a sound investment. The number of non-owner occupied is usually limited; so it pays to check first.

From personal observations and experience I know that Seattle area homes are selling if they are:

• competitively priced,
• well prepared for sale
• offered by a motivated seller, and
• marketed aggressively

I’ve listed and sold two Seattle properties in March which met these four criteria. During the same time I’ve also helped two buyers purchase homes.

Buyers have plenty of choice and will buy when the above criteria are met. Obviously, buyers are up against tougher lending standards. Still, first-time buyers with good credit, steady income and savings for a sizable down payment have the pick of the litter - if they can afford it.

The problem with Seattle residential real estate is affordability.

Currently, the average Seattle area home price is $414,518, just about double the national average of $207,272.

Why’s that?

• More people are moving to Seattle than are leaving.
• Seattle companies are still hiring and opening offices here, such as Google.
• The local government curtails land use.
• The local geography fosters exclusivity.

Take a look at a Seattle area map and what you see are bodies of water dissecting the land. What you get is an abundance of highly desirable waterfront properties. Add the undulating hills that rise from these waters and you get desirable view properties. Waterfront and views sell for a premium.

The solution for many first-time buyers is to “go condo” or to buy further out and settle for a longer commute. In the meantime, prices on some Seattle area homes are coming down. One example is Kirkland condos, especially those at the higher end. The highest foreclosure rates are south and north in cities like Burien and Monroe. These foreclosures came about through the combination of easy credit, lofty expectations of appreciation, and perhaps optimistic assessment of increased personal income.

What the Experts say about the Seattle housing market.

PMI Corporation, the company that provides private mortgage insurance, looked at the risk of home prices declining over the next two years (pdf file). Seattle ranks in the least risky group. Speaking to the status quo, The Wall Street Journal shows the Seattle area in 197th place out of 200 when it comes to mortgage payment delinquencies (by value) of 30 days or more.

Another measure of the same table is the current price level when compared to the peak of the US housing market which the WSJ determined to be the fourth quarter of 2005. Compared to that peak (being 100%) the national average price level is now at 91.9 percent - a drop of 8.1 percent. Seattle home prices, however, have still risen further since then to 117 percent.

This would suggest that it’s about time for Seattle home prices to cool down further. Foreclosures excluded, what I see is a stand-off between sellers and buyers. Seattle home sellers can’t believe prices are coming down, buyers are wondering by how much.