• N Portland: 4.3 months
• NE Portland: 3.5 months
• SE Portland 3.2 months
• W Portland 4.8 months

Average ($262,500) and median ($225,000) prices are almost the same as this time last year.   The report shows Days on Market is down to 123 days.  It was 153 this time last year.   On the other hand the graphic to the right shows that the rolling average and median prices are down.  That compares the last 12 months with the 12 months prior to that.

[Both graphics are from the Market Action report]

The Vineyard is just off Salamo Rd. near the 10th Street exit from 205.  It’s a J.T. Smith development with seven homes being built for the show that runs July 30th to August 24th.  Home sizes range from 4000SQFT to 4700SQFT and are priced between $900,000 to $1.1M.  Six are available and one is presold.

Today’s event was a great opportunity to walk though the homes as they are being built.

After the Index was set to 100 in January 2000, Portland seemed to lag about a year behind the rest of the country.  The majority of the areas tracked started their rise and hit their peak about a year ahead of Portland.  In recent years though it appears that Portland has fallen in line with the Composite indexes.  The Dallas chart line is interesting as they never saw the highs or lows that the majority of the country experienced.  Flat seems to be the rule for their market: talk about real estate being local!

Trying to compare RMLS Market Action to Case Shiller doesn’t work.  They reports use different areas, methodology and the most up-to-date reports are always a month apart.  RMLS reported the lowest inventory in years when the March report was released a couple of weeks ago which may put some upward pressure on prices.  It’s too hard to tell what factors will have the biggest impact on the market.  Does low market inventory, low interest rates and highest levels of affordability in years trump market jitters, foreclosures, political outcomes and economic concerns or vice versa?

Friday’s Portland Business Journal included Wendy Culverwell’s article titled, “Tight markets pose hurdles.”  Unfortunately it’s a subscription only story so you can only read the first few paragraphs.  No matter what the market situation, buyers always want to put their best foot forward.  One tactic is to, “write an admiring note to the seller to show they’re the right buyer for the home.”  We fully agree and will often recommend that buyer’s write what we call a “love letter” to the seller.  Money talks but it’s not the only thing on the table.

Not mentioned in the article and potentially equally or even more powerful is having the buyer’s agent present the offer to the seller in person.  Stuffing an offer in into a scanner or fax with no cover letter or explanation happens frequently.  Often the transmission isn’t even followed up on.  “I just wanted to let you know that I sent an offer over on your listing to your email.  Can you confirm that you got it and let me know if you have any questions” is a lot easier phone call to make than, “I sent an offer over to you a couple of days a go and just wanted to check in.”  “We accepted an offer yesterday.”  “But I sent your offer to fred@homeseller.con.”  “Yeah, but my address is .com, not .con.”  Ooops.  We’ve seen it happen and now the next call has to be to the buyer to explain why they didn’t get the house…  What happens with the offer after it is signed is equally important to what is in the offer.

Presenting in person falls out of favor in a buyer’s market.  The competition is lower and often the only one on the table.  Schedules and locations have to be coordinated and listening to multiple offers can be a little arduous.  The buyer has the right to have their offer presented in person unless the seller specifically declines to entertain offers in person.  It is not the listing agent’s right to make that decision.  Of course if the seller is out of town, it’s not an option which makes the agent’s cover letter important:

“Our has written the attached letter introducing themselves to you and why they love you home and can see raising their family there.  Of the houses we looked at yours is by far the best match for them.  Additionally, we have tentatively scheduled the home inspection for tomorrow at  noon.  They’re pre-approved for their loan through John at XYZ bank.  The pre-approval letter is attached but you can call John directly at 555-1212.  He is expecting your call.  If you have any questions for me, please let me know.”

The goal is to convey the human aspect of the offer than the numbers on the earnest money agreement can’t convey.  None of the tactics are going to be appropriate for every situation.  An investor planning on tearing down the home that has been in the family may not want to share that!  There isn’t any room for anything but the truth in presenting.

Average sales price climbed to $252,600 but is still down .04% for the year.  In 2010 we saw strong numbers in the between March and August that was all given back as the year came to a close.  It’s too early to tell if we’re going to have a repeat of last year or whether we have really started to turn the corner.  I do feel more confident than last year.  The Fed reported yesterday that they were not touching interest rates which helped perk the stock market to near highs.

I’ll update my local inventory chart ASAP but as a teaser N. Portland has 4.4 months of inventory, numbers that indicate a seller’s market.  West Portland, an area that has been averaging higher numbers than the Metro report, is at 5.4 months.

Source: S&P Indices and Fiserv

Portland’s Case Shiller report for January 2012 looks like deja vu all over again.  The Index dropped 2% from December, mirroring the start to 2011.  In 2011 the Index posted losses for the first three months of the year followed by six straight months of gains.  The small gains fueled a lot of optimism and talk of “we’ve reached the bottom” but the last quarter of 2011 gave all of the gains back with three consecutive down months.  At today’s 129.96 the Portland real estate market is close to July 2004 prices and a new low since July 2007′s peak.

A couple of weeks ago when RMLS Market Action for February was released most of the metrics were positive.  Case Schiller looks at a seven county MSA versus and has a sixty day lag versus RMLS’s “Portland Metro” which is a five county area and reported on two weeks after the end of the previous month.  They also have different methodologies so making direct comparisons is difficult.

You’re going to have to make you own determination as to whether “Now is a Great Time to Buy” or whether we’re yet to see the bottom.  While Portland has suffered, a quick look down the list shows a lot of markets have experienced a lot worse.  Las Vegas peaked at 234.  The Index was set to 100 for all markets January 2000.  Washington DC has remained the strongest of the bunch.  When were there in 2010 a local said its because, “politicians arrive when they are elected but then they never leave: they become lobbyists.”

Buyer Johny looks at a house and subsequently makes an offer.  Johny has been warned that if the seller is there to keep a poker face.  You don’t love or hate the house.  They don’t meet so its never becomes an issue.

Savvy Seller gets the offer and is somewhat torn between accepting the offer and countering back.  Do I take the risk of the buyer walking away in an attempt to get a little more money or do I just grit my teeth and live with it?  Johny’s agent had him write a brief “love letter” as to why the seller should accept his offer but anyone can pen a good cover letter.  It’ll be his first house, it’s at the top of price range but meets all the requirements and he promises to be a good steward of the house if the seller will let him have it.   Savvy Seller wishes he knew more about the buyer’s true motivation.  Wonder who this Buyer Johny is…

Buyer Johny hasn’t changed any of the default privacy setting in Facebook and Savvy Seller is now reading Johny’s wall posts and status updates.  Here’s a sample of what is shown:

• I’ve got to get out of this rental.  The neighbor’s dog won’t shut up and I swear the couple upstairs are nocturnal.
• Got pre-approved today.  Can afford a lot more than I want to spend so should have lots of options.  One step closer to getting out of this hell hole rental.
• Got a raise today!!!
• Made an offer on a house today.  I have to have it.  Love it.  Perfect.  Offered less than asking…fingers crossed.  I really hope I don’t have to pay more to get it.

So much for the poker game.  Johny has given Savvy Seller the social media equivalent of a neon sign declaring his love of the house.  Completely unintentional but the damage has been done as it makes the seller feel much more confident in the decision to counter.  The status updates are a much truer representation of Johny’s feelings than the “love letter” is.  Savvy Seller counters $5000 and Johny decides he can’t let it slip away.

Is it fair to say that Johny’s updates cost him $5000. They may not have been the only factor in the decision to counter but it certainly didn’t help his cause.  If Savvy Seller hadn’t changed his privacy settings Johny might have learned that Savvy Seller has been unemployed for six months and had just found a new job in Seattle so is really motivated to sell.  This scenario is only somewhat contrived and is aimed at underscoring that not everything stays where you hope it will on the Internet.  It’s based off a status update from a Realtor friend last night.

Example 1: Bank A (“the First”) has an $80,000 note on a property.  Bank B (“the Second”) is owed $20,000.  We’re going to ignore closing costs which will drive the cost of the sale up and the proceeds down.  If the property’s market value is $90,000 the Second is going to be shorted at least $10,000 in the sale as the First is entitled to all of their debt to be cleared before the Second receives any proceeds.  The Second has to approve the sale before it can close.  The Bank A does not approve the sale as they are being paid in full.  Under the new RMLS rules when the seller accepts an offer the status will be changed to SSP and when Bank B approves the sale the status will be updated to Pending. If the property forecloses Bank A will take ownership of the property and Bank B will get nothing which should provide motivation to approve the sale.  Note that logic does not always apply!

Example 2: The property is going to sell for $75,000 so both banks are going to be shorted and therefore both banks have to approve the sale.  The status will be changed to SSP when the seller accepts the offer and it is sent to the banks for approval.  When the second bank approves, regardless of what order that occurs in, the property will be changed to pending.

The SSP status is similar to the Bumpable (BMP) status in that it will still show in searches as available property.  Pending sales do not appear in searches.  Our “What is Bumpable” post is one of the most viewed posts on this blog.

Most of the monthly metrics for the Portland real estate market were up in February according to the February 2012 RMLS Market Action released today.  Inventory dropped from 7.0 months in January t0 6.5 months.  In February 2011 there were 10.9 months of listing inventory.   The drop comes from a higher rate of sales (up 17.5%) and a decrease in new listings coming to market (-13.6% from February 2011).  The jump in pending listings, up 32.5% since this time last year, is encouraging too.  The average sales price is up 2.4% to $255,100 compared to January but the median price lost 1.3% to $211,000.

From the “real estate is local” theme inventory levels are considerably lower on the east side of the Willamette River within the city than shown from the five county “Metro Portland” data shown in Market Action:

• North Portland: 4.6 months
• NE Portland: 3.7 months
• SE Portland: 4.8 months
• West Portland: 6.6 months
• NW Washington County: 7.4 months

The average sales price of $255,100 is down from a peak of $355,000 in 2007.  That’s pushed affordability rates higher than we’ve seen in nearly a decade.

AFFORDABILITY – According to a formula from the National Association of REALTORS®, buying a house in the Portland metro area is affordable for a family earning the median income. A family earning the median income ($72,000 in 2011, per HUD) can afford 182% of a monthly mortgage payment on a median priced home ($216,600 in December). The formula assumes that the buyer has a 20% down payment and a 30 year fixed rate of 3.96% (per Freddie Mac). [Reporting December 2011, the most current month available]

With low inventory levels, interest rates and other positive signs (Portland unemployment down to (a still high) 8.2%) we still need to be cautiously optimistic about where our market is heading.  Last year it looked like the market was on an upswing throughout the first half of the year.  That fizzled out and left us mostly flat for the year.  Even with less than five months of inventory in certain areas around Portland I don’t think that we’re going to be comfortable with the phrase “seller’s market” for some time.  We’re seeing the return of the investor to the market which is increasing the competition for what is already a reduced number of active listings.  We’re seeing multiple offer situations more often and other houses going sale pending with just a handful of days on market.  That’s due to increased competition but also because sellers are more willing to embrace the importance of accurate pricing and reacting to market feedback quickly.  Buyers are going to continue to be afraid of overpaying for property until we have a long run of stability or market increases.  Their fear, real or perceived, is going to keep sellers twitchy about getting escrow closed versus losing the buyer and going back on the market.  There may have been multiple offers to start but many buyers won’t come back after being rejected once.

Part of APRE’s motivation in wanting us is to hire successful agents that can apply traditional real estate methods to the oft maligned stigma of bank listings; some of it well earned.  Our goal, along with Atlantic & Pacific’s, is to elevate the purchase and sale of REO/Bank Owned property to an experience on par with that of traditional real estate.  Atlantic & Pacific, through their affiliated business ventures and systems, is able to alleviate some of the challenges of taking on bank owned listings so that we can focus on getting them sold.  During a recent call to a utility company it was assumed that I was putting the utility in my name and on my credit card.  Not the case, we have a department that takes care of that.  Her response, “that’s cool, I wish more did it that way.”  That’s an indication of APRE’s tagline, “Different & Better.”

Ultimately John Q. Public Seller and an institutional seller want the same thing: the most amount of money possible for their listing for the least amount of hassle.  The process of getting there is similar but no two properties or sellers need every tool available.  Monitoring bank owned listings requires a systematic approach and an understanding that we are the eyes and ears locally; they’ll never see the property they’ve been charged with selling first hand.  What’s obvious to you and me standing there has to be conveyed in pictures and words- the same for a traditional seller who has relocated or is selling an investment property.  Honing those skill benefits our traditional sellers too.

Our newest listing (bank owned) in the Pearl District’s Pinnacle Condominiums provided the perfect opportunity to try something new: a time lapse movie highlighting the view.  The two bedroom/two bathroom unit has 180 degree views from the West Hills to the Fremont Bridge.  I  used painter’s tape to fix the iPad to the window for 18 hours.  What you see here is nearly 4000 photographs compressed into just over two minutes.  It’s not perfect but its pretty cool to me nonetheless.  I learned some things that should make the next one better.