Math smiles on move-up buyers

Mike Stuckey Senior news editor • Profile • E-mail

BOTHELL, Wash. - After two years of married life in a 680-square-foot, one-bedroom Seattle condo, Lori and Chris Kirsten were ready to spread out in a real house with room for a home theater and a yard where the Labrador retriever they had always wanted could roam.

The Kirstens prepared to list their condo for sale and go house-hunting, banking on equity in the unit, which Lori had brought in 2003 for $130,000, to help with the transition to a larger place. Seattle’s hot real estate market had pushed the condo’s value to $215,000 or more at its peak in 2007.

But their home search lost some steam when their agent told them Western Washington real estate prices, although not in the freefall experienced elsewhere, had still declined to the point that their unit might now fetch $25,000 or $30,000 less than two years ago. When they saw condos comparable to theirs selling for as little as $170,000, “I thought, ‘I just can’t do it,’” Lori recalled.

Their mood brightened when they began shopping in the spacious neighborhoods of this suburb northeast of Seattle and found a 3,000-square-foot, four-bedroom split-level on a half-acre of towering fir trees that they wound up buying for $425,000. That’s $86,000 less than the $511,000 peak value placed on the home by real estate Web site Zillow.com, $64,000 below the original asking price of $489,000 and even well below the final asking price of $438,000.

A buyer’s market
The Kirstens — Lori, 36, is a physical therapist and Chris, 33, is a Microsoft manager — are among the relatively small number of home buyers across the nation who are taking advantage of the record drop in real estate prices and historically low interest rates sparked by the mortgage meltdown and foreclosure crisis to move up into bigger or fancier digs.

It’s a trend that many in the languid real estate industry would like to encourage.

“Obviously, if you’re selling for less than you could have gotten two years ago, you’re disappointed, but you really need to look at your bottom line,” said Walt Molony of the National Association of Realtors. “If you’re trying to trade up, whatever you’re going to trade up to is going to sell at a discount, too. You need to look at your net.”

Real estate agents from the foreclosure epicenters of Florida and California to more stable markets like the Seattle area are using that advice to lure move-up buyers.

“Do the math,” said agent Mark Zawideh, who has been selling homes in the suburbs west of Detroit, where prices have declined 18 percent in the last year alone. “If you’re in a $200,000 house (the median price in the area) and you lost 18 percent, that means you lost $36,000,” Zawideh said. “But if you’re moving up and buying a $500,000 house, that person just took a $90,000 loss, so you can see you’re making 54,000.”

“If you didn’t sell at the peak, be happy,” Zawideh said. “Don’t look back and be sorry. The fact that you’ve waited ends up being a great decision. A lot of people get excited when they sit down and do the math.”

Helping move the market
While buyers seeking larger homes have traditionally not been a huge part of the market — about 15 percent in the Realtor association’s 2008 survey — Molony said they likely contributed to an uptick of 5 percent in year-over-year shopper traffic in February, a figure that he expects to be bested when March numbers come out today. In addition to the increase in shoppers, existing home sales also rose 5 percent to an annual rate of 4.72 million in February, the association reported.

A federal tax credit and other incentives for first-time buyers probably contributed more to the surge in both numbers, with half of all buyers now newcomers to the market, according to National Association of Realtors figures.

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