Portland Real Estate Blog

Yesterday’s Portland Business Journal reports that RMLS is adding a green construction field to listings. Buyers will be able to search for homes that meet certain energy standards. Kria Larcher is credited with pushing RMLS to make the change. Great job.

The article says that she is a “Certified EcoBroker.” What’s that? It turns out that it is a designation offered by EcoBroker.com and is not recognized by the National Association of Realtors. There are some education requirements and an annual fee to be able use the designation. There are five local brokers that appear on the company’s website.

I think the idea of being a green Realtor is great. We drive hybrids, use recyclable paper stock whenever possible and do our part when we can. What I am not happy about is the proliferation of designations offered by companies that are not backed by the National Association of Realtors. Another such example is Real Estate Cyberspace Society.

I don’t think these designations add value the consumer because they add even more confusion about the alphabet soup that Realtors can put behind their names.

For the second meeting in a row, the Federal Reserve left interest rates alone. It’s good news for those with adjustable rate mortgages and those thinking of buying and refinancing. They cited a cooling national housing market and declining gas prices for taking the pressure off deflation.

The August Market Action report is out. While the appreciation numbers still continue to look great at 16.4% over the last 12 months, the numbers may be misleading.

Appreciation over the previous 12 months as reported by RMLS:

August: 16.4%
July: 17.4%
June: 17.4%
May: 17.4%
April: 17.9%
March: 16.4%
February: 16.0%
January: Not reported

I’m not a math major but know enough that a bad month or two at the end of twelve months won’t yank the overall average down much. We see a whole percentage point drop between August and July which should serve as a warning.

The question is how strong of a warning? Would anybody really be upset if their property investment returned appreciation in the high single digits? Does anybody really expect THIS market to see continual depreciation of more than a month or two, if at all?

This post is a close copy to the comment I made on Marin Real Estate Bubble last night.

Headline: Realtor Teeters on Edge of Falling into Vat of Tar; Bloggers Wait Patiently to Apply Feathers.

I recently posted “So You Want to be a Realtor.” Anonymous hits the nail on the head: barriers to entry for real estate are too low. The industry allowed it to happen and is going to pay the price. The good news is that as “easy money” becomes a harder proposition, a lot of stupid Realtors will be forced to join other portions of the workforce (scary thought).

The other component to this thread is ethics. Either you have ethics or you don’t. My job and my income require that I sell homes. It’s hard to tell someone not to do something when it hits your bottom line but sometimes I have to. C’est la vie. I wouldn’t want to do this if I had to question myself everyday but I don’t have to. Sometimes we turn clients away because we don’t like what we are being asked to do. I think any attorney (ethical) will tell you the same.

The real estate industry brought a lot of this on themselves, no doubt. The client, in search of the easy buck, has also perpetuated the mess by not seriously interviewing the agent that they entrust a major financial transaction to. Clients often don’t want to hear the truth and will go find a Realtor that will tell them what they want to hear. Agency laws that allow an agent to represent both sides of the transaction should be banned. We won’t do it. I will probably burn in Realtor hell for that statement.

Not every Realtor is the same. Understand that and you’ve contributed to the cure.

With the nation quaking in their collective real estate boots, the Portland real estate market is bucking the trend and is alive and moving forward. It’s not the scorching market of yester-months but we’re not seeing the bottom drop out like some had predicted.

RMLS Market Action for July puts 12 month appreciation around 18%. That certainly takes into account the hot months at the beginning of the 12 month cycle but if we end up around 10% appreciation for 2006, nobody should be complaining.

Rents are cheap compared to real estate right now. Rental rates have not increased as rapidly as property prices. Renting is often considered an investment for the future- your landlord’s. The costs to landlords will eventually get passed down to the tenant.

Let’s do a little simple math and see where it takes us (think big picture). One is to rent a house that just sold for $300,000. It rents for $1400 per month. A year’s rent is $16,800. The other option was to buy that house with 20% down. Last year, it would have cost about $246,000 if we use the 18% appreciation figure. 20% down would require $49200 cash. Today it would require $60,000.

Looking ahead, we predict appreciation for the next 12 months to be 9%. Our same $300,000 house is now worth $327,000 and our cash to buy it has increased to $65,400. A $60,000 investment has returned $27,000 equity in 12 months. Yes, we are ignoring the closing costs, costs to resell, the tax benefit and the higher cost of the mortgage compared to renting and other factors. Alternatively, you can spend $16,800 in rent. My rough calculation that your mortgage and taxes payment will be $1800.

But I don’t have $60,000! We’ll take the same house. Put zero down. Ask the seller to pay up $9,000 in closing cost and prepaid expense so the house effectively sells for $309,000. At the end of the year, there is $18,000 in equity for no out of pocket expense at closing. Rough mortgage calculation including taxes $2500. The difference is the amount of the loan and a higher interest rate for 100% financing.

Should you rent or buy? That entirely depends on your situation.

Portland City Council voted to keep the industrial zoning in Linton industrial. The vote (no unanimous) will block developers from building residential real estate in the industrial zone.

Anonymous Blogger, Laquedem, has an interesting post on the subject on his blog. It discuss the ramification of the vote but also land prices for industrial versus residential zoned land.