I just ran a quick search in RMLS: Portland (areas 141, 142, 143, 148), pending, one day on market in the last month. There are 52 results that span a price range from $127,000 to $1,275,000. Strong eveidence that an aggressively or under priced house can sell in any market at any price range.
RMLS released February’s Market Action report.
Click on the graphic to enlarge.
Inventory levels dropped last month from a peak in January. Appreciation over 12 months still looks good but I can’t put a lot of stock in the numbers since it averages out some hot times and some not-so-hot times. It is interesting though that Milwaukie/Clackamas has the highest 12 month appreciation rate; North Portland usually has the honors. I do feel buyers are returning to the market; we have more pending transactions now than we have at any given point in the last six months.
We applied for a simple equity line on our house. We got a letter from the bank on Saturday noting that my credit report showed a 30 day late pay. A little further investigation revealed that the same bank reported the late pay on an account with automatic payments. Whoops, their mistake and it is being taken care of. The result? An 80 point drop in my credit score since last check! AnnualCreditReport.com give you the chance to check your credit from Experian, TransUnion and Equifax. You have to pay a little extra for your score (you are entitled to your report only for free once a year from each agency). I choose one every three months rather than all three at once. If one is wrong, it is likely that all are wrong.
We’ve previously discussed how buyers can compete in any market. We’ve talked about informally bundled services; one stop shopping if you will. Some pundits have derided the idea. I’ve disclosed that Prudential Northwest Properties owns Columbia Mortgage outright and a portion of Transnation along with Coldwell Banker, Windermere and John L. Scott (12.5% each (Land America Title is the mother company)). As a Realtor and therefore independent contractor, I receive no monetary benefit by encouraging the use of Transnation and/or Columbia Mortgage (RESPA laws make sure that is the case). What I get is confidence that the transaction will go smoothly. Now I can guarantee it. Prudential Northwest Properties will put its money where my mouth is. So, without further adieu, introducing:
Not only is it a buyer’s advantage, it is a seller’s advantage. If the buyer uses Columbia Mortgage and the transaction is closed through Transnation, we will provide a one year AHS Warranty to the buyer. Previously when we have written offers, we’ve asked the seller to provide that warranty.
Additionally, the program offers (straight from the main office text):
1. FREE CREDIT LOAN APPROVAL
Obtaining loan approval will help you search for the right home and allows you to be ready when you find it. It’s a free service of Buyer’s Advantage.
2. FREE HOME WARRANTY
Buy with confidence and peace of mind. Buyer’s Advantage will provide you with a free One Year Basic Home Warranty from the industry’s leader; American Home Shield. A $290 value.
3. CLOSING COSTS GUARANTEE
No more surprises at closing that stretch your budget even more. We guarantee that your closing costs will not exceed those stated in the FINAL GOOD FAITH ESTIMATE or we will pay you the difference.
4. ON-TIME CLOSING GUARANTEE
One of the most painful delays in a transaction is an unmet closing date. It can cause great financial and emotional hardship for both the buyer and seller. We guarantee that we will meet the closing date specified in the Purchase Agreement or we will pay the Buyer and Seller $500 each.
5. FULL LOAN APPROVAL GUARANTEE
We guarantee that the Buyer is able to close using the approved loan program or we will pay the Seller $1000. You, the buyer, now have an advantage when your offer is presented. The Seller will know for sure that you are qualified to purchase their home as stated in the Purchase Agreement. We guarantee it!
6. 3-DAY TITLE REPORT GUARANTEE
We guarantee the fastest turn-around for the best rates and we put it in writing. We guarantee to deliver the preliminary title report to the agents, lender and escrow within three business days of written request at the lowest possible title rates.
7. HOME SERVICES
When you buy a home with Prudential Northwest Properties, you gain exclusive access to our industry leading Home Services department. Our Home Services coordinators work as a personal concierge to help you with all your home ownership needs.
Pundits, have at it. Serious buyers, give us a call.
We hear the lament all the time: “I’ve been priced out of the Portland market.” First, it is only fair that I let you know that we own four homes in Portland so I come from the “other” side. Second, the grass is always greener over the septic tank.
Correct me if I am wrong, but I think what is really being said most of the time is that, “I’ve been priced out of living in my dream neighborhood in my dream house so woe is me.” When I bought my first house, I was fortunate to have down payment help but I also had three roommates paying towards the mortgage. Dream situation? No.
Every home purchase has trade offs. When prices started to skyrocket in the Bay Area, Petaluma, an hour to the north on a good day to San Francisco, was an acceptable commute in order to own a home for some. Many of those homes are now worth seven figures themselves. Think of that in Portland terms: you could live 10 minutes south of Salem and still have what those folk viewed as an acceptable daily commute.
You can still spend less than $200,000 and have a Portland address. It may not be where you want to live but you would own it. It is absolutely true that you can rent more house for your dollar than you can buy in Portland. That is a lifestyle choice for many. Homeownership is not for everyone. We can banter about the tax benefits, that prices are going to drop drastically (they are not in my opinion) or what have you, but my point is that if you want the privilege (it is not a given right) of owning a home and you have planned accordingly it should be possible in this market. If it is not possible today, you have to assess your situation and see what you need to do to make it possible in the future under what are reasonable assumptions of lending requirements in the future. Of course there is an income component and I won’t discount it.
The Beach Boys closed out our annual convention last night. The two days included the obligatory rah rah and way too many awards honoring our success (we are President’s Circle winners) but also there was some great information and ideas that will help improve our business even more. Our son, Ryan, made the trip with us.
David Lehear is the National Association of Realtors chief economist. He spoke about the real estate market is healthy at 3-8% annual appreciation. Many markets got way beyond that and it couldn’t be supported continually as buyers moved away from the fundamentals. The rapid appreciation did not look good on paper and eventually some of the local markets “balloons” deflated (there were no bubbles to burst in his view). Eighteen months of recession hurt the market but now he believes that the fundamentals of the economy look good and we should see normalcy in the overall market. He does have concern about how the subprime “monkey wrench” will play out in the recovery.
One of his other concepts is that real estate is local (also the title of his latest book which comes out next month). He simply said that real estate occurs locally. Some areas didn’t participate in the boom years at all. They’re healthy markets now. If we consider Portland, we had good appreciation, not great and our market has taken a hit but not tanked. A lot of buyers have sat on the sidelines but as sellers begin to lower prices a little (Realtors are partially to blame for not being more forceful about lowering prices sooner to react to the market), they are now ready to buy. Seller’s ask for a price but the market determines it. It only takes one ready and willing buyer to sell a house.
“The market has slowed; houses are spending more time on market. If you list your home, be patient.” That’s become a familiar tone in the Portland real estate market in the last few months. There is some truth to that. January’s RMLS Market Action, the most current issue, says that Days on Market in December was up to 65, that’ significantly higher than December 2005’s 44.
There were only 2% few pending transactions so houses are still selling. Accurate pricing is more important than ever. The house across the street from us was pending in just four days (listed by our neighbor who is also a Realtor). There are more listings, an additional 500 added in December which confirms our previously anecdotal statement that we were much busier in December than previous years.
Graphic source: RMLS. Click to enlarge.
In Arizona, a buyer can walk into Joe Realty and meet with Joe Loans and Joe Title and Escrow without walking out the door. In Oregon, we can’t do that by name but we can coordinate the process using affiliated businesses. Prudential Northwest Properties owns Columbia Mortgage and there are offices in each one of our branches. Prudential also owns a portion of Transnation Title along with a number of the other large real estate companies in the area. As Realtors, we receive no monetary benefit from our clients using either Columbia Mortgage or Transnation. The biggest benefit for us and for our clients is the relationship. We know what to expect and we don’t get caught off guard by surprises because somebody wasn’t doing their job.
When we write an offer for a buyer using Columbia Mortgage and Transnation we know that we are putting a good offer forward and this allows buyers to compete in any market. It’s tough when you’ve just met a buyer recently and you’ve found the dream house together and the buyer is preapproved through a broker you don’t know. When a listing agent inquires about the prequalification letter from an unknown source it doesn’t give us the opportunity to put our best foot forward, “I don’t know anything about FredzLending out of Texas…” If I was a seller, I’d be looking for something stronger regarding financing before I accepted an offer.
We’ve had some discussion in the last couple of weeks about lending requirements tightening and how that will effect our market. I’ve been more optimistic outlook on how it will impact the Portland real estate market than other commenters. Subprime lending is clearly in dire straits. A clip on the news yesterday said that 31 subprime lenders have closed their doors. If you had a loan lined up for a purchase at one of these institutions, tough luck.
Lending rules are dynamic. Just because you have a rate locked and everything looks good, the lender can change the rules before closing unless you have a “loan lock” not just a rate lock. If you are on the cusp, the lender might ask for reserves (a number of months worth of payments) in the bank where none were originally required.
Our market has shifted towards the buyer. There are more homes on the market and they are taking longer to sell. There is not enough data yet to show how prices are fairing. Sellers (and some Realtors) are being forced to make the mental shift that houses aren’t going up at double digit rates anymore. This has resulted on some aggressive opening listing prices which then force more rapid price reductions. We should see the percentage off original selling price drop.
The buyer mix will probably change too. Investors may increase as high loan to value buyers are forced out of the market. Cracking the market is the hard part but I think there is a big enough pool of qualified buyers, even under stricter requirements, that our market is not going to freeze or crash. Others may disagree.
Something else we may see is sellers asking buyers to be preapproved with a certain lender. If there are two offers and one is qualified with a subprime lender, the seller may want a second opinion of that buyer’s ability to perform.
The exchange of Like Kind Property is the key to a 1031 Exchange. The IRS states:
Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.
Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.
Like-kind is generally thought of investment property for investment property. If you trade a rented single family, you could be a condo for a rental. If you trade personal property, you have to trade a tractor for a tractor, not a tractor for a harvester. Basics of a 1031 are:
1) 45 days to identify the property and total of six months to close on the property (properties). If the 45th or 180th day falls on a weekend or holiday, it is the business day BEFORE, not after that is the deadline.
2) Must maintain the same amount of debt. If you had a $100k mortgage, you’d still need $100k of debt spread amongst the properties.
3) Your must spend at least what you sold. If you sold for $400k, you must spend at least $400k but it could be four 100k properties.
Getting off the 1031 cycle is the hard part. The general rule is Exchange, Exchange, Exchange, die. Heirs inherit at the market value the day the acquire, not your cost basis when you purchased. Lucky them.
If you are participating in a 1031 Exchange, please don’t take this as gospel. You need to make sure that you are following the process properly throughout.
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