Archive for the ‘Portland Real Estate’ Category:

February’s Case Shiller Index was released today.  CNN’s headline reads, “Home Prices Lowest Since 2002.” For Portland, home prices sit at July 2004 prices: 129.60 which represents a .36 slide from January’s Case Shiller Index.  Case Shiller reports lag 60 days and are released on the last Tuesday of the month.

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?

We’re hearing it more and more: multiple offer situations on properties in Portland.  A tighter real estate market has resulted in inventory that, at least by statistical measure, can be classified as a seller’s market.  Six months of inventory is usually considered market equilibrium and Portland Metro inventory is now 5.0 months and even lower in some close-in areas.

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.

RMLS Market Action for March 2012 was released yesterday.  Inventory has dropped to recent low levels at 5.0 months.  The pending and closed sales are up both when compare to last month and last year.  New listings are down compared to last year but up from February.  We appear to be seeing another shift in the market where buyers are competing for properties and having a harder time finding properties that meet their criteria.

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.”

We’ve often told sellers that when a buyer walks through the house they sometimes know more about the house than the seller does.  PortlandMaps offers a wealth of information about a property.  On the other hand, Facebook and Google can tell a lot about either party (or their wonderful Realtor).

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.

321 properties in Portland had their RMLS status changed to Short Sale Pending (SSP) yesterday.  A short sale is a real estate transaction where the proceeds of the sale will not fully pay off the creditors that are owed money.  Short sales are subject to the approval of at least one third party.  Each creditor that will not receive all the money they are owed has to approve the sale.  Under the new SSP status, “When the Seller accepts an offer, the status will change to SSP. When the Third Party accepts that offer, the status will change to PEN[ding].”  You can read more about the short sale process here.

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.

Part of our motivation in joining Atlantic & Pacific Real Estate in November was to gain access to bank owned listings in Portland and the surrounding areas to compliment our existing business.  Bank owned listings are going to be a significant part of our market for a number of years and we have no intention of heading down the road of being the stereotypical “bank owned agents” and foregoing the core of our business: our past clients, their referrals and our Internet presence, including this blog .  We saw what happened to the “new construction agents”: eventually the niche players become extinct if they fail to evolve as the market changes.  In the near future we’ll be launching a website featuring pre-list bank owned homes.  It will be a place to be notified of upcoming listings before they are in RMLS.

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.

Interactive maps make me happy which makes this a happy post.  MetroTrends has a nifty interactive map that show migration to and from the 100 largest metro areas.  Relocation to Portland remains strong; over the last ten years Portland has seen a migration inflow.  Seattle is our largest trading partner and we’ve actually exported more residents than we’ve gained from our neighbors to the north.  Californians seem to like it here (I’m one of them) and I think we can understand the allure of Phoenix weather.

Click image to launch interactive map

From the interactive map there is a drop-down box on the upper right side that give more mapping options, including housing prices and rental affordability.

The short term migration forecast for Oregon remain a net positive but the Office of Economic Analysis says:

Slowdown in Oregon’s economy in the recent years resulted in smaller net migration and slow population growth. Estimated population growth and net migration rates in 2011 are the lowest in over two decades. This slow population growth, as a result of slow economy and high unemployment rate, is expected to continue in the near future.

Longer term forecasts show that Oregon will add over 1.4 million people between 2015 and 2040.

It was less than three minutes after an earthquake hit the San Francisco Bay Area this morning that the first posts started to appear on my Facebook page.  You can’t avoid the horrifying images of the tornadoes that swept through the Midwest and South a few days ago.  Floods, earthquakes, forest fires, and other natural disasters make up a significant amount of our headlines, just not locally.   Yet.

On one of those brilliant “five mountain view days” we have to remember that we’re looking at a bunch of volcanoes.   A number of years ago I got an email asking about volcanoes and earthquakes.  I wrote a brief reply and the response was a long diatribe about how all of us in the Northwest are on the brink certain destruction by volcanic activity and if those didn’t get us the earthquakes will.  Not exactly a comforting thought but not impossible.  Mt. Saint Helens reminds us once in a while that its an active volcano.  The Oregonian has a good write up on the potential for Pacific Northwest earthquakes.   Someone once told me that, “an extinct volcano is extinct until it is not.”

With each natural disaster, the news coverage eventually makes mention of insurance.  The event was or wasn’t covered.  What happens when “The Big One” hits?  Most pundits say it isn’t a case of “if” but “when?”  Will you be covered?  I can’t say what insurance coverage you should have but you want to know if your covered even though the whole goal is to never have to use it.  Earthquake coverage is often an add-on to a policy. Would an act of God be covered under your policy?  What about a landslide?

Flood insurance is one type of coverage that is often mandated by lenders.  If you are in a flood plain, it’s likely flood insurance will be required.  You can do your initial search for potential hazards on PortlandMaps.  Enter the property address and click on the “hazards” link on the “maps” tab.  There’s flood, slide, earthquake and fire information on that tab.

I think most of us take our insurance policies for granted.  An audit of your policy might reveal that you’re under-insured, not covered or even paying for coverage you don’t need.  And if you’re reading this as a renter: please take a minute to make sure you have a renter’s policy.  The odds are your possessions aren’t covered under the landlord’s policy.

Is it cheaper to own or rent a home?  I did a Craigslist search for a close in home with the complete property address listed so I could then research what I thought it would sell for as a comparison.  I happened to find a home that sold for $150,000 at the end of last year.  I can tell from the pictures in RMLS and the ones posted on Craigslist that some work has been done.  I think I am being generous with adding $10,000 for a theoretical market prince of $160,000.

After adding in the property taxes and an educated amount for home insurance we get a payment of $1013.86 per month.  The house is listed for $1250.  The downturn in the real estate market has made owning a home more affordable than it has been in years.  If you put down the FHA 3.5% down for a loan of $155,440 your payment would drop to $992 plus any required mortgage insurance.  With 20% (investors may be required to put 25%) the payment is only $861 per month.

We need to acknowledge that this is massively simplified.  Not everyone will qualify for a 4.0% loan, we haven’t addressed down payments, maintenance costs, tax advantages, market risks or anything else.  It  shows us one reason that investors are retuning to the market and the investment properties should cash-flow positive which they didn’t do at the peak of the market: appreciation was the carrot (and therefore not a sound investment strategy looking back). It shows how competitive the rental market has become and that may give some potential buyers reason to further investigate their own situation to see if which scenario works best for them.