The Federal Reserve said they may lower rates at their next meeting to aid borrowers that are going through subprime woes. The George Bush, speaking at the White House, had similar comments that they might intervene. Both said it is not their job to bail out “speculators” and others that played the market but government action might help the market. A reduction in rates and/or tax breaks might be a part of the solution.
We’re excited to announce a new look and some new tools on our www.TurnerRealtors.com website. We’re really happy with the updated look but the addition of Google Maps into our map-based search engine is a great enhancement.
RMLS reports days on market at 52 and 58 days for July and YTD, respectively. In ‘06 it was 38 and 42 days. The broad market RMLS snapshot doesn’t reveal the whole story for Portland. In the four reporting areas for Portland we see this for July 07 (06 in ()):
N Portland: 48 (26)
NE Portland: 42 (29)
SE Portland: 38 (31)
W Portland: 44 (46)!!!
Gresham/Troutdale: 63 days (37)
Milwaukie/Clackamas: 60 days (40)
Oregon City/Canby: 66 days (51)
Lake O./Oregon City: 55 days (46)
Quoting July’s RMLS Market Action:
A family in the Portland Metro area making the median income ($63,800 in 2007 according to HUD) cannot afford to purchase a median priced home in the area ($295,000 in June). According to a formula from NAR, a median income family in the Portland Metro area can only make up 88% of a monthly mortgage payment that has a 20% down payment and 30 year fixed rate.
This is the lowest affordability rate recorded since RMLS™ began tracking the data in 1994. However, this may be affected by changes to the way that HUD calculates median income.
I looked at the HUD data and I am not sure how their data translates to the 88% affordability number reported for Portland so I’m not sure how to compare it to other markets. It is concerning that the 88% is the lowest it has ever been in our market.
I took this picture last night while previewing a listing in NE Portland. Might have made a better picture if I had moved my car but the point is the three real estate signs (the Prudential one on the left is not our listing). I’m not sure if I have ever seen a street of existing homes with neighbors listed and the house across from them listed.
“Closing date to be on or before May 31, 2007.” Seemed pretty simple for an earnest money agreement written in mid-April. It would have been a slam dunk: sold on contract, no appraisal, and no professional inspection (gut remodel). Clearing title proved more challenging than anybody expected. The seller inherited the property almost thirty years ago but did not follow through with changing the names on title. This meant that the tax record and deed only showed the deceased. Even with a will, the process of clearing title included seven death certificates and the notarized signatures of 13 people with potential claims to title, including one in New Zeland!
It closed/recorded today.
Tom pointed out that I hadn’t posted the above with the inventory numbers last week. I’d planned to this morning but the day got away from me (I did change the poll. Do open houses work?).
So what do we think of the above graphic from RMLS Market Action July? Numbers are worse in almost every category but I don’t see that the sky is falling (even if the weather does suck for August). You’ll have to go to another Realtor if you want double digit appreciation forecasts (found one last night) but the train appears to still be moving forward. We question how much stock we can put in these numbers every month but they are the best consistent numbers we seem to be able to agree to argue about.
Thanks for all the comments on previous posts. They’ve remained civil and well thought out.
RMLS Market Action for July just hit my inbox. Nothing really shocking in my opinion; inventory is up yet again (though not quite as high as in January).
I maintain that you can’t put a lot of stock in the 12 month appreciation numbers as you are still factoring in some high months from the beginning of that cycle. The most recent months have been tougher than any of the proceeding months.
There’s other real estate news that shouldn’t be ignored: $11.5 BILLION to bail out Countrywide Financial. It’s front page news of the Oregonian Biz section.
One of the primary roles of a Realtor is to counsel on what work a seller should or should undertake before listing a house for sale. Like most things, it is often a matter of opinion or a “cost versus value” proposition. Each year the National Association of Realtors puts out an article discussing just that. When it comes to painting interiors, the answer is Realtor Beige. The further your are from a neutral, nonwhite color, the more likely we are going to recommend paint if there is any question of its condition (note that there is no beige in our house other than in the basement). Why? It’s non-confrontational. Some consider white too stark. Some like bright colors that others hate.
It’s probably fair to say that I came up with this post in order to find a use for this picture of the dining room in the house that we bought last year. Someone spent a lot of time doing a very good job of painting something that most of us might not find so appealing. For better or worse, it’s now Realtor Beige.
It was on the market from Sept. ‘05 – Apr. ‘06 in a hot neighborhood. Do you think the paint had anything to do with it?
One more important question: are you a good painter? I thought I was until I paid a professional. I know now that I am an acceptable painter and “showroom” quality is either beyond my skillset or paitence.
This is a bit of a departure from my usual format as I normally don’t paste articles in their entirety but since this was emailed to me and all the sources are cited, here it is. Two different views of the risk to Portland real estate because of subprime issues. I searched Oregonlive.com for both articles with no result:
“Mortgage Meltdown: A subprime disaster area or use of subprime facts?
Gerard C.S. Mildner
Sunday Oregonian, August 12, 2007
Perhaps like me, you were alarmed by Angela Martin’s op-ed article about impending problems in Oregon’s housing market (”Subprime Disaster Heading for Oregon,” 8/5/2007). The alarm turns out to be misplaced, as there is no evidence that Oregon suffers any greater risk than the rest of the country of a housing market collapse due to subprime loans. In fact, borrowing and lending practices in Oregon are surprisingly conservative.
Subprime lending refers to mortgages issued to borrowers with low credit scores and hard-to-document incomes. Because of the increased risk of default, these borrowers are charged higher interest rates. They are often unable to afford traditional fixed rate mortgages and take out higher risk loans, including adjustable-rate loans, no-interest loans, teaser-rate loans, or payment option loans.
In her article, Martin, Director of the Economic Fairness Coalition of Our Oregon, argues that subprime lending in Oregon tripled between 2004 and 2005, that forecloses rose 23 percent in the last quarter, and that Oregon ranked seventh in the nation in negative amortizing loans. This is misleading.
The truth is that Oregon has one of the lowest rates of risky mortgages in the country. In a July 2006 report, the National Association of Realtors found that the Portland metropolitan area had about half the rate of subprime mortgages as the nation as a whole (5.7 percent vs. 10.1 percent) and a much smaller percentage of mortgages with loan to value exceeding 90% as the national average (7 percent vs. 16 percent). And in a September 2006 report, the Consumer Federation of America found that our rate of subprime refinancing was the lowest of any state.
In terms of delinquencies and foreclosures, there is no crisis in Oregon. According to the same National Association of Realtors’ study, the mortgage delinquency rate in Oregon is half the national average: 2 percent vs. 4 percent. Martin’s evidence for an “explosion” in foreclosures comes from a four sentence article in The Portland Business Journal, which in turn is a rehash of a press release by a Web site that promotes the selling of foreclosed homes.
Instead, a March 2007 report by a more credible source, the parent company of First American Title, finds that delinquency rates for prime mortgagees, subprime mortgages, and home equity lines in Oregon are some of the lowest in the country. And where delinquency did occur, the percentage loss to lenders was the lowest among the 50 states, again demonstrating conservative lending practices.
Having said that, there is evidence that Oregonians are high users of adjustable-rate mortgages and negative amortizing mortgages. According to the Realtors’ study, Portland area homeowners are more likely to take out adjustable mortgages than the nation as a whole, at 38 percent vs. 28 percent. And the First American study found Oregon had the fifth-highest adoption of negative amortization loans, at 9.1 percent vs. 7.3 percent nationally.
However, these borrowing practices reflect the high level of home equity experienced by most Oregon homeowners, as well as the high percentage of the elderly within the state. Given the cushion of the recent years of appreciation, many Oregonians feel comfortable taking equity out of their homes, whether to start a business, invest in financial assets, finance their child’s education, or use as income for retirement.
We should increase our efforts to educate consumers about the risks they take on with adjustable rate and interest only mortgages. However, we should also recognize that the creation of new types of mortgages has created significant homeownership and wealth-creation opportunities. People with less-than-perfect credit histories should not be barred from credit markets by ill-conceived policies. And we shouldn’t hype the problem with subprime mortgages by using unreliable and misleading information.
Gerard C.S. Mildner is the Director of the PSU Center for Real Estate and Associate Professor of Urban Studies and Planning at Portland State University.
SOURCES:
http://www.loanperformance.com/market_pulse/default.aspx
http://www.realtor.org/Research.nsf/files/06ORPortland.pdf/$FILE/06ORPortland.pdf
http://www.bizjournals.com/portland/stories/2007/07/09/daily38.html
http://www.bargain.com/news-09-06-2006.html
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