Sellers adjusting to real estate market

The last to rise and the last to decline: That’s how Wahkiakum’s realtors describe the county’s property values.

In 2003 the phenomenon now known as the “real estate bubble” was first used to describe the inflated property values in places like King County. Unfortunately for everyone else, the bubble expanded to encompass almost every square inch of land in Washington, and seemingly overnight, home values doubled while homeowners slept.

In 2007, the bubble began to pop and the vacuum it created exposed how mortgage brokers, banks, and the government-backed home lending agencies Fannie Mae and Freddie Mac had all thrown sanity to the wind by doling out homeloans to almost anyone who walked in their doors.

By 2008 the madness had all but ended, and, like drunks after a hard night at the bar, the banks woke up to realize inflation was dozing in the hallway and the value of the dollar had tanked. All those fine “high-dollar” homes peddled with adjustable rate mortgages had suddenly lost 30 percent to 50 percent of their value and homeowners were walking away from their properties, no longer able to afford the payments.

“The lenders even had loans for people who didn’t want to show the bank their income level,” said Bill Wilkins of Windermere Realty in Cathlamet. “It was crazy. They were called ‘paperless’ and if you didn’t want to provide your financial records to mortgage brokers or banks you just paid a little more interest.”

Wilkins said most buyers never read their signed contracts and didn’t know how an adjustable rate mortgage worked. They didn’t realize that in five years their ARM mortgage would raise their $1000 a month payment up to $1700.

“A lot of people didn’t care either,” Wilkins said, “they were just buying the home to ‘flip’ anyway.”

The bubble was slow to reach Wahkiakum, and the county was last on the list to feel the effects of the false-economy created by the home loan industry.

The first inkling of trouble came with a slight increase in property values in 2004. It wasn’t until 2008 when the county’s residents awoke to realize that their new inflated property values might be real trouble if the bubble burst, which is what happened.

In 2009 Wahkiakum made the local news because of the record number of property tax appeals filed by locals. Residents were upset after the county assessor doubled and in some cases tripled property values throughout the county.

“Right now I got people coming in here wanting to list properties they can’t sell, even for three-quarters of what the assessment is on their property,” said Wilkins.

Wilkins said his clients tell him that, according to the county, their property is worth a certain amount.

“I tell them well maybe you need to sell it to them (the county); good luck,” said Wilkins.

Property values also take a hit during recessionary periods and Wahkiakum is a long way from anywhere. The time it takes to get places, the gas to and from work, to shop, entertainment, all work in unison to lower a property’s values. These dynamics are magnified in the rural areas.

“So you put that all together and all of a sudden you can’t afford to live here anymore,” said Wilkins, “and it becomes even more of a problem when you want to sell your home and move back to the city because no one wants to buy it.”

Home sales in Wahkiakum are down significantly. Cathlamet has three real estate offices. So far in 2009, the three companies combined have sold a total of 15 homes in Wahkiakum, Wilkins said; his revenues are down by about two-thirds.

The housing market is like any other market – it has its swings. In Wahkiakum’s case the county is in an out-of-the-way section of the state. Yet most homeowners who want to sell think their house has the same value it had during the bubble market.

Wilkins said that if the person who was selling their home last year, or early this year, had dropped their price, they very likely could have sold. Now, with the economy slipping further into recession, and home mortgage lending even tighter, sellers will have to drastically cut the price of their home to get it sold.

“The other problem is,” said Wilkins, “the private seller is competing against too many repos right now.”

The repo market is tough to compete in, and the private seller learns quickly the true nature of corporate capitalism when they are forced to compete with a bank for the prospective buyer.

To make things worse, banks have the edge. In many instances the government has made it easy on banks by promising to cover any of the losses the bank might incur by selling a house for less than what’s owed on the mortgage.

“If there is one bright spot in the Wahkiakum real estate market, it's raw land,” said Cheryl Nelson from Cathlamet Realty West. “People are buying lots of lots.’’

The sales of small plots have increased slightly as baby boomers look to retire, but even here, property sales have to meet the litmus test of price, location, and taxes.

The difficulty with selling a lot or house in Wahkiakum is the difference between the lot’s assessed value, what the owner is willing to take for the property, and what the buyer is willing to pay.

“People here (Wahkiakum) don’t get it,” said Wilkins. “We have more listings than most real estate agents in Longview, and they aren’t selling. People must realize they gotta come down on their price if they want to sell their property.”