08/26/11 | by tomsblog

| Categories: Welcome

I put together these sales ratios the other day. (Sales Ratios Explained) What I found striking was the lack of sales activity over $350,000. With interest rates around 4 PERCENT and great inventory to choose from, what causes this? I will tell you a theory my brother Matt just shared with me. Matt says buyers of homes over $350,000 tend to be homeowners already; they are not first time buyers, as a rule. So these buyers have a house to sell. With values down, they may be in a low or negative equity situation. In any case, coming up with a down payment could be a trick, as most people use the equity they once had. Most are NOT sitting on a pile of cash, especially in this economy. Also, it is possible these people are of an age where they follow the news more closely. They see volitility in the stock market and absorb a lot of the negativity that makes news.

What will turn this around? Great question. Good economic news will help. As people gain confidence, some of them will enter the market. One good piece of news is that savings is up and many consumers have gotten a handle on revolving debt. Savings may also prove to be a solution in another way--providing buyers with a down payment.

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5 comments

Comment from: tomsblog [Member]

Did I make a sweeping generalization about young people not following the news? Sorry, kids, if you were offended by that.

08/26/11 @ 16:53

Comment from: northtacoma [Visitor] · http://northtacoma.net

I am inspired by the fact that Tacoma continues to pop up in these studies pinpointing the top residential real estate markets in the country in the near future.

My worries are not on real estate, specifically, but rather local business. Downtown has so much potential and it is crucial to all surrounding neighborhoods. There are real estate folks who disagree but I say the IGA grocery store downtown could be the first domino to fall in a potentially new retail movement on Pacific Ave.

Am I dreaming? Maybe. Aim high.

08/26/11 @ 17:14

Comment from: tomsblog [Member]

Between '05 and '07 when I was selling a lot of condos downtown I always thought a grocery store would be the final piece that made sense of the condo boom. If you are going to live downtown, do you really want to drive to Stadium Thriftway for a quart of milk? I love much of the new retail around Puget Sound Pizza, Downtown Dirt. I also really enjoyed hot yoga at Expand recently on Pac Ave. Great atmosphere, and it was $5 bucks! I think a lot of people find themselves downtown more than ever before. Thanks for your comment.

08/26/11 @ 17:26

Comment from: anon [Visitor]

Interesting, and distressing numbers guys. I think Matt is right, although I would add that the reason Matt is right is beceause Tacoma traditionally is not an area that could support a lot of 400k+ homes. There are only so many doctors and dentists in Tacoma who can buy a house the old fasioned way - with a huge cash downpayment.

Would be interesting if you could do a similar analysis for other areas (Gig Harbor, high income areas in Seattle, etc.)

09/02/11 @ 12:23

Comment from: tomsblog [Member]

Fair point about larger down paymets (and stricter underwriting). The environment for loans puts these homes out of reach for people who might have been buyers in, say, 2006. Thanks for the comment. I'll post sales ratios for Gig Harbor and Seattle next week.

09/02/11 @ 13:50

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