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Seattle-area home prices are manageable for typical workers, according to the chief economist for the National Association of Realtors.

"You may even say Seattle is underpriced if you believe Seattle is becoming a superstar city," Lawrence Yun told area brokers in Bellevue on Thursday. "Seattle is underpriced in relation to other West Coast markets."

The fact that home prices rose much faster than incomes in recent years in Seattle and elsewhere has led some market observers to predict prices will drop to bring the relationship back to historic norms.

Yun noted that dropping mortgage rates mean the same payment buys more and more house.

The percentage of income a typical family would have to pay for a typical home dropped from the low 20s in 1990 to the high teens through the early 2000s and has returned to the low- to mid-20s, according to Yun.

Yun's "superstar" comment echoed his assertion at the National Association of Realtors annual conference in Las Vegas in November that Seattle might be joining the ranks of cities in which housing prices shed their typical relationship to incomes.

"No one is moving to Cleveland," Yun said Thursday. "(Seattle) is an attractive area. People want to move here."

Down from a recent high of $481,000 in July, the median King County house sold last month fetched $435,000, up from $429,495 in January 2006, according to the Northwest Multiple Listing Service. January's house sales volume was off nearly 31 percent from a year earlier, whereas the number of houses on the market jumped almost 56 percent.

Some economists have predicted the area's home prices will fall as much as 5 percent from their peak.

Also Thursday, the founder of the Four Seasons Hotels and Resorts said Seattle has become a "World Class" city.

"This city is really on the cutting edge of what most cities are hoping to achieve," Isadore "Izzy" Sharp said in an interview after speaking to the Downtown Seattle Association.

Sharp praised the city's people, businesses and setting and said the business, education and arts communities "have worked together to round out what a city can offer to its permanent residents as well as people who visit."

Developer Seattle Hotel Group is building a 149-room Four Seasons Hotel topped by 36 condos on First Avenue, just south of Pike Place Market. The developer has sold 24 of the 36 condos, whose prices range from $2 million to more than $10 million, and expects to finish the project in late summer or early fall.

The Four Seasons has its own niche among the slew of condo, hotel and hotel-condo projects under development downtown, because it's small and high-end, Sharp said. But he also said so many people were building because they saw an opportunity and dismissed the idea that downtown might be approaching saturation.

"I think when a city starts growing, it keeps doing that, particularly when the political support is there," he said.

Yun predicted home sales nationwide would improve this year from a slow 2007, with sales and prices picking up in 2009.

The subprime mortgage meltdown, and associated foreclosures, had a big effect on Wall Street investors but amounted to a small percentage of the housing market in most places, with Washington's effect particularly small, Yun said.

And mortgage interest rates are at lows not seen since the 1960s, except for a few months in 2004, he said. "It's a once-in-a-lifetime opportunity in terms of interest rates."

Housing sales have scaled back to normal levels from the "excessive boom" of 2003 through 2006 and have stabilized, Yun said.

"We are probably scratching the bottom in terms of home sales activity."

But Yun noted that the market depends on fence-sitting potential buyers who are afraid of jumping into a market in which prices might continue to fall.

"It's hard to predict that psychology factor," he said.

Many prospective homebuyers will try to time the market. They wait until they think interest rates or home prices have hit bottom. This is impossible to predict due to many changing variables. By the time the housing prices change, interest rates rise. Or, by the time interest rates drop, housing prices rise or there is a short supply, which suddenly spikes the market. Now is an excellent time to buy because there is a balance between current inventory, ideal home prices, and lower interest rates.

Motivated home builders

Currently, many home builders are motivated to reduce their standing inventory, creating a great opportunity to buy now. Homebuyers today have the benefit of choosing from a larger selection of homes and also have the option to move in right away. As the market heats up, incentives will disappear and home prices and interest rates will edge up. Finding the right builder and the right home at the right price is the recipe for a successful purchase now.

Low interest rates

Working with an experienced lender helps give homebuyers the confidence to buy today. From a historical perspective interest rates have never been better. It has been nearly 50 years since interest rates have been this low. It is important to select a lender who will provide education, information and individualized service by securing a competitive rate for a loan that meets both short- and long-term goals while ensuring the home closes on time.

Buying low / selling high

Buying a new home now positions homebuyers to sell high in a fast-pace housing market. Successful homebuyers who reap the best returns on their real estate investments understand the long-term perspective. Real estate requires timing the market cycle and patience. In the current market cycle, homebuyers are not buying at the top of the market, so any home purchase made today has the potential to provide sizable equity return in three to five years once the market surges again. Also, it is vital to buy a new home from a builder who has a notable history of building quality homes that stand the test of time. In essence, buying a poorly constructed home at a great price today may cost you more in five years versus purchasing a well-built home from a quality builder whose homes tend to resell well.

Choices

While exploring new home choices, make sure to adhere to specific search parameters; otherwise, it can become overwhelming. Homebuyers would benefit from educating themselves on the location, the builder, the homes and all other important options. Make a list of prospective homes and eliminate the ones that do not meet specific needs and wants. Then revisit those that do. This will improve a homebuyer’s ability to make decisions quickly. A word of caution – most homes will not have 100 percent of what a homebuyer wants. The goal is to select a new home which best suits the needs of the individual homebuyer today.

Do you qualify for a better rate?

The Economic Stimulus Act of 2008 is a $168 billion plan intended to jumpstart the sliding U.S. economy. While a lot of media attention has been focused on the $600-$1,200 rebate checks that millions of taxpayers will begin receiving this spring, the new bill is also designed to help certain "high-cost regions" of the struggling housing market by:

• Temporarily increasing the "conforming loan limit" from $417,000 to as high as $729,750 in specified areas; and



• Temporarily increasing the size of loans the Federal Housing Administration (FHA) can insure from $362,000 to as high as $729,750 in specified areas.

If you're looking to purchase or refinance a home in a "high-cost region," this is great news. These temporary increases could help you avoid the higher interest rates associated with "non-conforming," or jumbo, loans. Although these new limits only apply until the end of 2008, the legislation does not exclude the refinancing of any past mortgages into these new "conforming loans." That means, if you qualify, you can take advantage of the new limits no matter how many years have passed since you obtained your mortgage.

While this is great news, I should remind you that qualification standards are tougher than ever. So your credit score and credit worthiness are more important than ever. Give us a call today. We can review your options and discuss if we can make this legislation work for you.

Do You Live in a High-Cost Region?
Not everyone will benefit from these temporary loan limit increases, but experts estimate that areas in at least 17 states will be able to take advantage of it. So how do you know if your neighborhood qualifies?

A high-cost region is typically determined by the median value of its homes. The median value is the specific price that is halfway between the least expensive and most expensive home sold in an area over a given period of time. Do not confuse this with the average home price. The median home price is the price at which half of all buyers bought more expensive homes and half of all buyers bought less expensive homes.

If that sounds confusing, don't worry. It is the responsibility of the Department of Housing and Urban Development (HUD) to determine, within the next 30 days, what the median home price is for regions across the country. But I don't want you to wait until HUD makes its determination; give me a call to discuss if you might benefit from this new legislation.