Portland Real Estate Blog

Yup, I missed Tuesday’s Case Schiller Report. Between February and March, Portland’s Index dropped from 176.24 to 174.39. A small decline but a decline nonetheless and return to April/May 2006 levels.

I also found this article, on the back page of Realtor Magazine (NAR’s publication), an opinion piece that says Case-Schiller is a conflict of interest.

Created by Shiller and Karl Case, an economics professor at Wellesley, the index is licensed exclusively to Macromarkets LLC for “developing, structuring and trading financial instruments,” says the Macromarkets Web site. Among Macromarkets’ products is the Housing Futures and Options index, which forms the basis for “directly investing in and hedging U.S. housing” on the Chicago Mercantile Exchange, where futures and options on the index are traded. “Every time a CME hedge is made, revenue flows to Macromarkets,” says NAR’s chief economist, Lawrence Yun. “People would hedge only if they believe price movements will be volatile.” Shiller is a founder and chief economist of Macromarkets. So, is the index biased to the negative? Its divergence from OFHEO’s findings is so wide that Andrew Leventis, the agency’s senior economist, has undertaken studies to find out why.

It will be interesting to see if their is a divergence. Is it Realtor backlash to negative markets or does it have foundation?

In the future, if you think I’ve missed something, bring it up politely rather than being snide about it.

We’ve discussed this before ( I think I am going to adopt the phrase “home rehabber” instead of flipper to my personal activities) but if you are considering getting into the rehabber/flipping business in Oregon, you’re going to have to be a licensed contractor. For the purposes of our home rehabbing, I am the managing member of Sapphire Development LLC (CCB #176425).

Who Needs To Be Licensed

http://www.oregon.gov/CCB/Licensing_I.shtml#Who_Needs_To_Be_Licensed

Oregon law requires anyone who works for compensation in any construction activity involving improvements to real property to be licensed with the Oregon Construction Contractors Board (CCB). This includes roofing, siding, painting, carpentry, concrete, on-site appliance repair, heating and air conditioning, home inspections, tree service, plumbing, electrical, floor covering, manufactured dwelling installations, land development and most other construction and repair services.

A CCB license is also required for:

• those who purchase homes with the intent to fix them up and resell them, even if they do not perform the work themselves.
  
• material suppliers that receive compensation for installing or arranging the installation of the materials.

The cost of being legal is so much higher than floating under the radar and hoping nothing goes wrong or you get caught. With Sapphire Development as the deeded property owner everything is more expensive. The property insurance is more than double what I would expect to pay if the deed were in my personal name. Sapphire has a construction loan which cost 2% in points. It’s a whole different world. This is the first time that I have been involved in a construction loan as we bought our last house on contract.

I met with a septic pumping company this morning as an inspection for one of our pending transactions where we are representing the buyer. Unlike a connected sewer system, a septic system requires a little more attention. They recommend:

• The system should be pumped every three years- this is a 1500 gallon
  system. 
• Nothing non-biodegradable should go into the system. This include
  feminine hygiene products. 
• Recommend RidEx added to system once a month (an enzyme).If there is a garbage disposal, add three tomatoes once a month (15 days
  after the RidEx). 
• Use liquid dish and laundry soap. Powders only degrade about 40% rather
  than about 99% for liquid soaps.

The buyer also has to be aware that if the City decides run a connected sewer system up the street, there is a likelihood that the owner will be forced to pay (just as an owner would if the City paved an unimproved street).

The Oregon Association of Realtors is advertising heavily this morning. KGW had a commercial and I just heard another one on Charlie FM for “Realtor Vision… because Realtors see things we don’t.”

This is the first time I have looked at the site and it looks like it has some good content. But since I see things you don’t it would be nice to hear some constructive comments about it.

We’re just a week away from closing and though nothing is official until it is recorded at the county office, I am comfortable saying that Sapphire Development LLC’s new rehab project is at 2356 NW Hoyt in the Alphabet District. It is a 1906 home that has been largely untouched and certainly not remodeled recently. It retains much of its original charm.

The house has been the subject of the Buyer Due Diligence series of posts that I have written in the last month. The oil tank is now completely decommissioned but we are still undecided what the overall heating/cooling picture will look like.

I am in the process of writing the application for the State Historic Preservation Office’s Special Assessment program and have met with Earth Advantage at the property (more on that soon).

Unlike many “flips” this project is wholly owned by Sapphire Development LLC, not a person, and the construction loan is in its name, not mine. It’s a very different process than buying a property personally. Me being a Realtor does give Sapphire an advantage as I am not earning a commission and that is reflected in the sales price but the seller nets the same as if I were not a Realtor and a co-op sale had occurred.

Future posts will look at things I haven’t discussed yet, where we are now and where we think we are going.

What is a flag lot? A flag lot is is a lot that has no direct street frontage. The lot is accessed by a driveway, usually down the side of another house. The picture highlights a flag lot.

There is no direct method to search out flag lots (or exclude them from) an RMLS search so analysis about them is tough. I expect that we’d find that the flag lots have a lower value than the equivalent home with curb frontage. The flag lot allows for higher density by splitting existing lots and getting lots in developments where curb frontage is not possible.

The disadvantage for the house on the curb is that anyone wanting access to flag lot has to pass by the edge of their house. In some cases the drive may be shared by easement. The disadvantage for the flag lot is that there is no curb appeal as there is no curb. The advantage for the flag lot is that there should be minimal street noise (depending what is in the back yard) and the sales price should be a little lower than the same house on the curb.

I’d be curious to hear people’s experience living in either the curb house or the flag house.

Alpha Environmental is working on decommissioning the leaking oil tank. At last check, the hole had been dug out about four feet beneath the bottom of the tank. The top and bottom of the tank have been cut out and the walls retained to help maintain the integrity of the hole. Standing next to the dumpster, you can smell the diesel.

Western Architectural inspected the stucco and has determined that it can be repaired as needed and is not failing.

I talked to Urban Forestry about the horse chestnut street trees. Even though they have cracked the sidewalk, destroyed the sewer and, in my personal opinion, are the wrong trees for their location, they will remain. I’d happily replant with more appropriate trees given the opportunity. I couldn’t apply for a permit to take them down until we are the legal owners even with the seller’s permission. You can apply for building permits at BDS with the seller’s permission prior to taking ownership which we will do once we have the drawings complete. I will be satisfied if we can get a permit for a curb cut to create off street parking. There is evidence that there may have been a curb cut previously.

I’m going to an Earth Advantage class this morning and then meeting with them at the house to see what we can do “green” in the remodel project.

It’s not often that you get three posts on one day but RMLS Market Action for April just hit the streets. The trends are largely what we would expect to see in keeping with Case Shiller and other reports: “Also of note was the first decline in average sale price since August 2002 and in median sale price since May 2001 when comparing April of the current year to the same month the year prior. Average sale price dropped 3.9% and the median fell 3.5%.”

One area of growth from March to April was pending sales, which grew 6.8% (2,070 v. 1,938). This is the first increase in pending sales from March to April since 2005. New listings also grew 2.7% (5,295 v. 5,155). Closed sales dropped 6.4% (1,582 v. 1,691). This drop is on par with the last three years, though, as closed sales have dropped an average of 6.7% from March to April.

This surprises on one hand as I am surprised the buyer pool in this range has changed much but on the other hand jumbo loans are harder to come by:

One factor in this price decline may be a 51.2% (21 v. 43) decrease in the number of homes sold for $1 million or more, when comparing April 2008 with April 2007. Year-to-date, sales in this price range are down 31.9% compared with the same time last year.

Portland Spaces is one of our city’s newest magazines. I received a clip of the condo graphic via email a couple of days ago with no source so it took a little tracking down. Portland Spaces has graciously allowed it to be reproduced here as it appeared on page 34 of May/June issue. A little number crunching shows the average percentage of listed condos against those built in the last five years for the six cities is 37%.

Welcome to the Portland Real Estate Blog three ring circus. In the main ring we have Portland Real Estate. In the ring to your left have those that believe the Portland real estate market is in the tank and has 30% of value or more to give back. In the right hand ring, we have those that see Portland as a strong and growing housing market. Realtor, Charles Turner has the role of Blog Tamer. The audience is made up of all demographics with a universal interest in the Portland housing market. Some potential participants don’t participate out of fear of being mauled.

Some of the participants are getting a little agitated. The comment that Tiffany says isn’t hers was sent from a different IP address than her other comments. It is not an IP address associated with another commenter but that doesn’t mean that it isn’t.

I’m not having a lot of fun doing this right now. The sarcasm, impersonation, meanness and attacks need to stop. If you can’t say something with some modicum of respect, even if you disagree, don’t comment.

I reposted (and added a couple of lines) this comment from this morning as its own post to make sure that the entire readership sees it.