Apr
20
2008
Oregonian Outlook 2008
By Charles Turner
The Sunday Oregonian was at the front door this morning. Included is Outlook 2008, 68 pages on the O’s outlook of everything Portland; including eight pages of real estate. I haven’t read it yet. It is interesting to note though it does contain a lot of ads, it does not have the header that is on the weekly home section: “A publication of the Oregonian Advertizing Department.”
Feel free to read and discuss here. It is not online. The only reference I find online concludes, “Outlook 2008: Inside today’s paper.”
The online version?
http://www.oregonlive.com/special/
What’s next for condos? Six educated guesses
The developers
Mark Edlen, co-founder of Gerding Edlen, a major condo developer:
“Clearly things have slowed down.
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“A lot of us felt things were overheated for some time. But product has continued to sell in an orderly manner. The best projects are being successful, and the ones that aren’t, aren’t.”
Homer Williams, condo developer and chairman of Williams & Dame Development Co.:
“This is going to be a slow year. The ground is moving, and people aren’t going to do anything when the ground’s moving. I don’t think it will turn around for six months, maybe 12 months. When the economy hits bottom, we’ll see things start to go up.
“Actually, we’re not overbuilt in Portland. We have a year to two years’ supply of condominiums. But until there’s confidence in the mortgage markets, there won’t be a change. We’re not seeing devaluation of values in Portland. But the market is not robust.”
Anyone else confused by these comments?
And being the bubble believer that I am I have to C and P these two folks’ comments (not RE agents, not developers)
What’s next for condos? Six educated guesses
The statistician
Caroline Latham, owner, RealFacts, a research organization and database specializing in the housing market:
“Many condos were purchased to flip at maybe 35 percent profit in a year. Somewhere between a quarter and a third of condos that have been bought are not occupied. They were bought as investments. They will be back on the market. There is a market for them. More and more people want to live in downtown Portland.”
The forecaster
Jerry Johnson of Johnson Gardner, an economic consulting and forecasting firm in housing:
“It’s easier to do autopsies than forecasts. The market is so slow right now, it’s hard to know where it’s going. Demand has vanished. It’s just an unusually difficult forecasting period.
“This is the wrong time to sell. It’s also the wrong time to buy as the market may go down.
“The problem with high-profile condos is that purchasers aren’t first-time homebuyers. The price point is high. These people are making the decision to move up. The market may get worse before it gets better. People are deferring decisions because the market seems to be adjusting.”
Jerry Johnson reiterated my belief as to why condo prices appear to be appreciating.
Any of you read the blog, Calculated Risk written by #1, a senior executive, retired from a public company, with a background in investing, finance and economics and guy #2 a former bank officer and mortgage lending specialist who is currently on extended medical leave?
Their post for today, April 20, 2008 is very interesting.
http://calculatedrisk.blogspot.com/
And just to let you know, there are more than us bubble heads predicting ugly times ahead. Even if you think Portland is unique and immune from all this it is definitely worth a read. we are talking beyond housing here…
Careful bearlee. You’re entering naysayer territory which will only open you up to chiding for having “sour grapes” or worse, being a bummer loser.
Drink the Kool-Aid bearlee and repeat after me…….Portland will escape the downturn…….capitalism will rescue the US…….housing appreciation of 20% a year is normal……..buy before it’s too late……..the worst is behind us……….here, put this pod in your closet and take a looooooong nap……….
Portland isn’t immune to a mild correct, but we just don’t have the same situation that exists in CA and FL because there wasn’t anywhere near the number of new housing starts over the last few years as there were in the areas that are really feeling the pain. The only part of the metro market I would say is in trouble is in Milwaukie and Clackamas area’s, where there was a lot of crappy new construction. I think the UGB really protected us in this situation, it kept the developers from building us under, and gave us increased housing density where it makes sense to have it.
Coming from the financial services field, let me tell that statisticians and forecasters aren’t don’t usually have the best take on things, and often just turn into play by play announcers instead of providig actionable insights. Did you see how much double talk was in Jerry Johnsons take on this? Its a bad time to sell, its a bad time to buy, may get better before it gets worse, oh my, forecasting is sooooooooooooooooooo hard!-gee Jerry thanks for taking a stand there, don’t feel to guilty cashing your check this week. If you want a good opinion on any market you need to get it from people who have money on the line, and people who have been successful. Ulitmately they are people who need to make deciscions.
“If you want a good opinion on any market you need to get it from people who have money on the line”
Like the NAR?!?! Sorry, couldn’t resist.
PS thanks for not slamming me:O) See, we can carry on pleasant debate.
Seems to me Portland has a tough row to hoe with:
= Rising unemployement
= Commercial real estate slowdown
= Rising defaults in alt-a & pay option loans
Almost half the loan products purchased during 2006 were alt-a and pay option loans. I’ll say that again for those who didn’t hear it…ALMOST HALF.
Pundits would say Portlander’s who took out these loans will be OK, because our “diverse” our economy weathers the recession.
But wait a minute, we are an economy 80% based in small businesses with 25 or less employees!!! While this guarantees a “diverse” economy, it also makes Oregon more vulnerable because small businesses depend on loans from banks to stay in operation. As a result of the global credit turmoil, banks do not trust each other right now and are reluctant to lend.
Local and regional banks are not only feeling the global credit turmoil, but they are also feeling the squeeze from the growing number of commerical real estate vacancies.
So for an economy 80% based in businesses which *need* banks to lend to them, the outlook isn’t so good. Nor is it good for the employees of the small businesses…or more appropriately for every 8 out of 10 people in this state.
“If you want a good opinion on any market you need to get it from people who have money on the line”
Though i do not have the papare in front of me I recall a few homebuilder ads in the O saying “It’s a great time to buy”?!?!
Dilletante,
The New Yorkers and rich Europeans are going to save our housing market. Just like they did Miami’s.
I meant investors, no suppliers, I think your right in discarding any advertising from the homebuilders. If you want some fairly honest insight from a home builder listen to Bob Toll’s comments on the first quarter conference call from Toll Brothers.
http://www.tollbrothers.com/homesearch/servlet/HomeSearch?app=IRconfcalls
They don’t build in Oregon, but many of the issues they address are effecting companies involved in new construction everywhere. Expanding on my earlier comment, if you really want to gain another perspective on real estate right now, pay attention to what publicly traded private mortgage insurers, brokerages who are deep in the mud with mortgage backed securities and CDO’s, and the builders are saying and how their stocks are reacting. Certainly not the whole story, but an important, and often overlooked slice of the pie.
“The New Yorkers and rich Europeans are going to save our housing market. Just like they did Miami’s.”
Thank god. The more Eurotrash, the better!
Have any of you seen the underwriting changes made by Fannie Mae, Freddie Mac, and several other private mortgage insurers?
http://tinyurl.com/6gbhnn
Here is a breakdown of the new rules
= No declining markets
= 70% owner occupied
= 10% minimum down payment
= Adequacy of association budgets
= Requirements on commercial space
If this holds true for Portland, it will be nigh impossible to get a deal done here.
To quote Mike Shedlock…looks like it’s “no deal” on condos.
These new rules apply to condos…sorry for omitting that piece.
70% owner occupied?! Hmmm, so for new towers, if the building is 45-70% vacant/unsold, how will this be inforced?
Wow!
From Salvador Del Cid’s blog on March 26, 2008
http://ownaportlandhome.blogspot.com/
Both FannieMae and Freddie Mac have changed the guidelines for lenders when the property to be financed is a condo.
If the buyer of a condo:
1. Will occupy the unit and finance more than 90% of the purchase price, or
2. The buyer will not occupy the unit (an investor, landlord), or
3. The project is new construction or a new conversion, then…
The lender must:
1. Review the organizational documents of the homeowners’ association (HOA) to confirm that they comply with FannieMae/FreddieMac requirements, and
2. Review the budget of the HOA, and the most recent Reserve Study to insure that the budget includes reserves for replacement and repairs
3. Obtain a letter from an attorney confirming that the organizational documents of the HOA comply with State Law and FannieMae and FreddieMac guidelines.
4. Issue a project acceptance to be contained in the lender’s loan file.
But the rich New Yorkers and Europeans who are snapping up the condos here don’t need no stinkin’ Fannie or Freddie! They have cold, hard CA$H.
Guys, Fannie and Freddie aren’t private mortgage insurers. I was talking about companies like PMI, MGIC, and Radian. Fannie and Freddie purchase loans from lenders and package them as mortgage backed securities. Also, private mortgage insurers don’t develope underwriting stadards, but Mr. Dilettante was partially correct in stating that Fannie and Freddie do.