On May 7th, the Atlantic & Pacific Real Estate name went the way of the dinosaurs and we rebranded to Carrington Real Estate Services.  Over the last 18 months you’ve grown accustomed to the orange and green signs outside of our listed properties.  Now you’ll see our fresh new look of the Carrington Real Estate Services brand in and around Portland.  The Turner Team, the individual agents in our office and management remains unchanged but now we have the ability to leverage the Carrington name in all of our efforts.  Carrington Real Estate Services is now in 25 states and growing.

Bad blogger, bad blogger.  When you realize your last post was March’s RMLS Market Action report and April’s came out two days ago it’s time to start typing.  So here we go.  There’s no real surprise the inventory is low.  At  3.1 months that mean that if we stopped taking new listings, the 6498 listings would be gone just over three months at the current rate of sales.  That’s a Metro Portland number so you’re going to find some variation in more localized areas: North Portland has 2.5 months, NE Portland 2.1 months, SE Portland 2.6 months and West Portland 2.1 months of inventory.

Inventory is a based on the rate of closings which is up 16.4% from 2012 and the number of new listings which is also up 4.4% compared to last year.  It doesn’t take much of a memory to remember when we had 19.2 months of inventory!

We’ve seen a 15.3% increase in average sales price from a year ago.  We’ve proven that the market can not sustain double digit grown but we will see some downward pressure on that when the Oregon Supreme Court rules on the legality of MERS (electronic mortgage transfers),  If they rule in the banks’ favor, they will revert to the quicker non-judicial foreclosures.  If the court rules in the plaintiff’s favor the judicial foreclosure process that is already taking place will eventually run its course and those, usually lower priced, homes will come to market.  Either way, bank owned foreclosures have not gone away; they’re stuck in the system.  I don’t believe that banks are holding sell-able inventory from the market.

How low will it go?  RMLS Market Action for Portland real estate was released yesterday.  Metro inventory dropped to 3.2 months which is the lowest it’s been since June 2006.  “Metro” is a five county area so when you look at the closer-in areas the picture changes:

• North Portland: 2.6 months
• Northeast Portland: 2.2 months
• Southeast Portland: 2.3 months
• West Portland: 3.2 months
• Northwest Portland (area beyond Skyline): 2.0 months

Average prices are up 15.3% from the first quarter of last year but I advise a little caution when looking at this figure.  The number of REO properties has dropped significantly in the market place.  These properties are typically lower priced than the market average.  The switch from non-judicial foreclosures has not stopped the foreclosure process.  The appearance is that REO has gone away when in reality the pipe that they have to flow through has simply gotten much longer and they will eventually reach the end of the pipe and come to market.  We should expect that to apply downward pressure on average prices.

Other indicators are strong: Accepted offers and closed sales are the highest since 2007.  The 12 month rolling average price is up 7.5% to $282,000.  The median price is up 9.1% to $240,000.  Again, we’ve got the highest number since mid-bubble years so a little caution may be in order.  Alternatively, I could be a little pessimistic and we’ll power right through all of this.  The stock market certainly seems immune recently.

Traditional buyers (non-investors) need to make sure they are in the strongest position possible when it comes down to writing an offer.  That means being educated on the market and the process and having a trusted Realtor adviser.  Tools on the Internet, like this blog, Zillow etc, can provide lots of information but neither can replace one-on-one interaction.

You can’t buy a house if you can’t find the house.  Finding a Portland address is pretty easy if you remember these tips. In an era of GPS navigation, Google Maps and cell phones we may spend less time not knowing where we are but it’s still nice to have a basic understanding of the city.

Portland is divided east and west by the Willamette River. The Burnside Bridge divides the north and the south. If you are in Southwest, you know you are on the west side of the river and south of Burnside. The intersection of the bridge and river is also the “zero block”. Street numbers, 100 per block, start there and fan out. 3900 SE Hawthorne is 39 blocks from the river (at SE 39th). The exception to the rule is North Portland which is the peninsula formed by the Willamette and Columbia Rivers. The eastern edge of North Portland is Williams Avenue.

There are a few areas (Laurelhurst and Ladd’s Addition) that get off the grid system in SE Portland. Sandy BLVD cuts a swath through SE and NE Portland heading northeast from SE 11th Avenue all the way to NE 82nd and beyond. Some addresses in southwest near Johns Landing and Lewis and Clark College and the Willamette River start with zero. Lewis and Clark College is located at 0615 SW Palatine Hill Rd and electronic systems don’t always get it right.

The streets in Northwest are alphabetical starting at Burnside. Many of the names in the “Alphabet District” are named after the figures that shaped Portland’s past including Lovejoy and Pettygrove who settled the city’s name with a flip of the coin (if Lovejoy had won, we’d be living in Boston). You may notice that Portland native and Simpson’s creator Matt Groening, borrowed some of the neighborhood’s street names for characters.  Beware that there is no rhyme or reason to the two way and four way stop signs throughout the area. Even more alarming can be the total lack of traffic control at some intersections in some of the southeast and northeast neighborhoods.  NW 21st and NW 23rd are business district streets where the speed limit is 20 MPH and every intersection is a crosswalk- the pedestrian has right of way, posted or not.

The building numbers on the north and west sides of the streets are numbered odd. If you can remember “Northwest is odd,” you’re set. With near pinpoint accuracy, you are now ready to find Portland real estate with a native’s confidence. Just leave the umbrella at home.

40+ Offers on this Home!

When the Portland Business Journal’s January 2013 Case Shiller Index headline is, “Housing recovery starts to look like a boom,” y’all better be paying attention.  Long the messenger of doom and gloom Portland’s 8.3% year over year increase is something that’s hard to ignore.  That said, the Portland index slid a little between December and January.  The .55 point drop is expected during the winter  months and small compared to December 2012- January 2013′s 2.8 point loss.  It does look like Portland is poised to finish the usually weak winter months in a much better position than we have seen in years.  I’d like to see 5-7% increases as we have to be concerned with creating a bubble if prices rise to fast.  Also see my caveat below.

What does this mean to what we actually see on the streets?  General consensus is that interest rates will remain low and that the Fed will act when unemployment gets down to around 6.5%.  They are continuing Quantitative Easing measures which will help keep rates low.  As the stock markets continue to charge forward, investors start to pull money out of bonds which cause rates to rise.  Huge interest rates are unlikely but in reality rates have little room to go down and lots to go up.

Multiple offer situations aren’t unusual so having your ducks in a row when you’re ready to go is critical.  We’ve got an (under priced) REO property with 40+ offers submitted.  That’s a stark reminder that the listing price has no baring on the selling price. The market will determine the final price.  Though 40+ offers is the exception, not the rule it is a very strong indicator that the real estate investor has returned to the Portland market.  All of these offers are hard money or cash- no financing is being considered, even a rehab loan, as the bank wants as close to a sure thing as they can find.

It’s also worth filing this in the back of your mind: the Oregon Supreme Court is expected to rule on the legality of MERS transfers and that will determine how foreclosures are handled in Oregon.  Banks have started filing judicial foreclosures which are more expensive (for everyone) and take longer.  This has caused the percentage of REO sales in the market to decline and as they are typically lower priced properties the average price has increased.  When those properties start coming to market we may see a decrease in average price even if the quantity of sales stays high or increases.  I do not believe that banks are sitting on sell-able properties.  Those in the shadow inventory have some sort of issue.

Since I was remiss in posting about the February RMLS Market Action let’s make note here that inventory dropped to 4.5 months and the February 2013 closed sales we more than we’d seen since February 2008.

A little tardy with regarding last week’s December 2012 Case Shiller Index but here we go.  The Index in Portland dropped .78 of a point in December.  Even though that’s more than the .5 it lost in December 2011 and many areas posted positive December 2012 numbers the reason for the title of this post and optimism is that between August and December  2011 the Index lost 3.04 points.  In the same period in 2012, it was up 1.23 points.  The same five month period in 2010 posted a 10.10 loss!  In fact, we have to go all the way back to 2006 to see the previous gain for that period.

This doesn’t mean we are in a full recovery.  Many of the markets tracked by Case Shiller showed a positive December.  I’ve already talked about how the slow down in foreclosed properties coming to market may be creating some false gains as well.  Case Shiller uses match pairs in its data.  123 Main St. doesn’t get reported in Case Shiller until it matches up with a sale of 123 Main St.  If it is currently in judicial foreclosure we’re not going to see that property weigh down the Index until it resells as a foreclosure- presumably for less money than its prior sale.

We’ve seen losses in January, February and March the last three years so we should be able to see the cumulative loss for the winter months in May when the March report is released.

RMLS Inventory Jan 2013

All of the conversations I have been having with Realtors lately center around a the theme, “I am loving this market, just wish there were more houses to show my clients.”  December gave us the lowest Portland housing inventory we’d seen in years.  Inventory climbed to 4.7 months in January but there were only six more listings on the market at the end of the month compared to December.  Why did inventory climb if the number of houses on the market is the same?  Inventory is a ratio: listings/closing.  For January, listings remained virtually unchanged but closings slowed, pushing inventory closer to market equilibrium.  Traditionally six months has been considered the middle point between a buyer’s and seller’s market  but I would argue that in this “new” recovery market, it is five months or less.  Buyers are more apt to walk away from a transaction than they were in the bubble market.

Equally important is the lower box of the graphic- prices are rising.  Looking at the same report a year ago, the 12 month rolling average was down 6.1% and the median was down 6.9%.  Now it’s up 5.4% and 7.3%, respectively.

It’s entirely possible that we’ll see prices drop a little when REO properties (bank owned) start to work themselves through the judicial foreclosure process.  With the uncertainty of how the Oregon Supreme Court will rule on the legality of MERS transfers (the transferring of deeds without recording), banks have started going down the judicial foreclosure route.  It’s a longer and more expensive process than the non-judicial foreclosures.  Since those properties are typically lower priced than traditional sales that may put downward pressure on prices and they may be somewhat inflated now because there are very few REOs on the market now.

A few weeks ago I found a reference to an 1997 HUD directive for the creation of FHA Bridal Registry Gift Fund accounts.  Google was little help in uncovering what the in-and-outs about the program.  There are lots of references to it on Realtor websites, recent blog posts and the like but not one of them actually provided a real case example.  I couldn’t find a mortgage broker who knew anything about it.  Since the directive asks that lenders register with their local HUD office, I contacted HUD.  HUD suggested I contacted FHA directly.  FHA says the program is no more.  Any current reference to it would be inaccurate.  But not all is lost. You may not be able to register for a home anymore through this specific program (you should talk to a lender about other options using gift funds), but you can register for a Dodge Dart.

Credit: DMS Architects ADUpdx.com

I love my in-laws but I don’t particularly want to live with them.  That said, there are certain life events that might necessitate that later on.  What would we do?  Where would we put them?  Maybe an ADU would be the answer.  An accessory dwelling can be internal to the main house, attached or detached.  Before going any further it is important to note that each jurisdiction has different rules and regulations so check with your government entities before getting deep into your project.  For this post, we’re going to use current City of Portland regulations.   Most of this post is based on the continuing education class taught by Kathy at DMS Architects and Darin Walding at Advanitis Credit Union.  DMS has a resource website at www.ADUpdx.com.

The City of Portland restricts the maximum size of an ADU to 800SQFT and up to 75% of the main house.  That means a 1000SQFT house could have a 750SQFT ADU.  There are lot coverage restrictions, height and setback requirement and that’s why it is necessary to seek City and professional advice before getting too deep into your project.  Jurisdictions also have different rules as to what determines an ADU.  In Portland it is a second sink.  In others it is the presence of a second stove.  DMS provides the links to each jurisdiction’s ADU website.

Another consideration is the construction of an ADU is enough to trigger a tax assessment (pulling a permit to remodel in Portland triggers).  That means that they have the ability to reassess the entire property so if you have a sweetheart deal now that may go away.

ADUs don’t come cheap.  Advantis Credit Union has a Rehab Mortgage that is ideal for this part of the project.  Its styled after a “construction loan.” where the Loan to Value is calculated on the predicted finished value, not current value.  There are additional hoops to go through and there are more fees as the money for construction held in escrow and paid out in draws as work is completed.  The expectation is that a contractor is doing the work, not the homeowner.  They will go to 90% LTV on owner occupied and 75% on investment property.

ADUs aren’t going to be for everyone but it might be the best way to get additional space without moving.

The loss of .31 of a point in November 2012 ended seven straight months of gains for Portland’s Case Shiller Index.  The Index, at 142.13 is nearly nine points higher than it was this time last year and closely matches February and October 2010, and November 2004.  The Index is up 12.5 points (10%) since it’s most current low in March of 2012.  With each passing month we can become a little more confident that March was the bottom of this current market.  That’s not to say that we are totally out of the woods yet.  While interest rates are expected to remain low in the foreseeable future there are any number of things that could torpedo a recovery.  A sustainable market can probably handle between four to seven percent annual appreciation.  Assuming the market adds six percent a year it will be May 2017 by the time we reach the August 2007 peak of 186— a 10 year recovery.

It’s always important to remember that the Case Shiller Index is released the last Tuesday of the month, lags 60 days and defines Portland Metro as the seven county MSA.