Portland Real Estate Blog

This was just sent to me in an email:

LOCAL SCHOOL DISTRICTS ADOPTING NEW TAX ON CONSTRUCTION –Be prepared for this new tax when picking up permits now and in the future. Several school districts have implemented the $1.00 maximum per square foot construction excise tax made possible by SB1036. The following have instituted the tax or are currently reviewing it:

• North Clackamas School Dist. #12
• Oregon City School District
• West Linn/Wilsonville School District
• Oregon Trail School District (Sandy)
• Beaverton School District
• Hillsboro School District
• Canby School District
• Molalla School District
• Tigard/Tualatin School District
• Forest Grove School District

In addition, Gresham, Barlow, Reynolds and Centennial School Districts began collecting the tax through IGA agreement with the impacted cities on July 1. The tax is intended to be calculated on
livable space only, although the City of McMinnville is attempting to add garage space into the
calculation. Stay tuned for future details.

Rather than waiting for future details, let’s see what we can find with some help from Google…

The text of OR SB1036. This version is a PDF summary. It appears to have been written prior to passage. It mentions an exemption for projects under $100,000. I don’t see that in the HTML version.

It looks like the bulk of the email I received was from the Home Builder’s Association Of Metropolitan Portland website.

Portland’s Bureau of Development Services has this fact sheet which includes:

Q What is the School Construction Excise Tax (CET)?
A In the 2007 Regular Session, the Oregon State Legislature passed a law (Senate Bill 1036) that will help
Oregon school districts pay for a portion of the cost of new or expanded school facilities. The bill allows
school boards, in cooperation with cities and counties, to tax new residential and non-residential
development. School CET may be imposed only on improvements to real property that result in a new
structure or additional square footage in an existing structure. The tax may be assessed at up to $1 per
square foot on structures or portions of structures intended for residential use and up to $0.50 per square
foot on structures or portions of structures intended for nonresidential use. In addition, school CET
imposed on structures intended for nonresidential use may not exceed $25,000 per building permit or
$25,000 per structure, whichever is less.

It looks to me like the tax hits new construction and additions, not remodels where the square footage remains the same.

This story was published in the Tigard Times prior to the bill’s passage. It does appear that changes were made in the bill after the story was written and before it’s passage; hospitals are exempt like the article suggests.

If this bill might impact your project please consult the appropriate agencies before relying on information presented here!

Map of the 20 cities included in the Case-Shiller Composite 20 (Graphic: Standard and Poors).

“Case-Shiller reports ____”, “RMLS reports ______”, etc. We are inundated with data but what does it mean? When a report refers to “Portland,” what does that mean? The answer isn’t the same from each source reporting. Case-Shiller reports “Portland” as these counties: Clackamas OR, Columbia OR, Multnomah OR, Washington OR, Yamhill OR, Clark WA, and Skamania WA according to their methodolgy report.

The S&P/Case-Shiller Home Price Indices began as a research project in the 1980’s when Karl E. Case and Robert J. Shiller began to construct a methodology to measure housing price movement.

I’m not going to attempt to summarize the methodolgy of computing the index- it takes them 40 pages in the report above! They do publish a two page factsheet which discusses the use of “sale pairs.” A specific address is tracked and each sale creates a data point. The pair is then weighted for the time between points, etc. The site reports 2692 sale pairs in Portland for the June reporting cycle (RMLS reports 1877 closed sales for June as an indicator that they are using different areas). Case-Shiller does not report on condos or new construction; residential single family only and excludes foreclosures. There is additional reading on the FAQ sheet from Standard and Poors.

Case Shiller for June is just out. The results for March through June are 174.39, 174.87, 175.3, and 175.03 respectively. The graph here tracks back to February 2006 and compares Portland to the Case Shiller 20 Composite.

Also on the cover of the O’s Business Section: “Home Sales Surprisingly Stronger” (Oooo, ‘NAR Propaganda’). NAR reports that sales rose 3.1%. This beat the expected 1.6% increase. This report runs through July.

Under the same headline the story is different, “Boost in Housing Activity Eludes Portland and Seattle.” Looks like we are the Case Shiller darlings no longer. “Portland and Seattle were among the top ten metro areas in the nation with the most pronounced drop in home sales.”

Case Shiller always comes out on the morning of the last Tuesday of the month. Think the NAR report was released the day before to distract or just a coincidence? And for “Buy Now” campaigns? NAR has just released their own. I haven’t seen it but I’ve warned against taking that phrase hook line and sinker.

***This graph added 4PM 8/26 (click image to enlarge). It shows that Portland is down 5.8% from this time last year. No tracked city remains in positive territory; Charlotte is down 1.0% at one end of the spectrum and Las Vegas down 28.6% at the other end in the same one year period.

I made brief mention of the Oregonian story on Sterling Bank foreclosing on 15 Buena Vista Custom Home’s properties. Buena Vista is not alone. A quick search on RealtryTrac on our TurnerRealtors.com website shows that there are 571 homes listed as foreclosures (it isn’t possible to get an accurate count from RMLS as “Third Party Approval” includes foreclosures, short sales, some relocation properties an some court overseen sales.

I thought the mortgage market was supposed to be tightening; almost everything that we see and have experienced says that’s the case which makes this article in Forbes, “Going Tribal”, even more surprising. Down payment assistance programs, as far as I know, are supposed to be going away soon. The idea that the seller pays for the buyer’s down-payment is high risk to lenders:

Follow the ball as it’s passed among six players on the field. First, Russell wired $5,940 of what was ostensibly Penobscot Indian Nation money from an account he controls to a title company assisting at the closing. The lender, a bank taking advantage of a federal loan guarantee, put up $192,060. The eager seller, a homeowner (Russell doesn’t usually work for builders or banks), was selling the home for $198,000 but collected only $191,665 (before the real estate agent’s and other fees). What happened to the other $6,335? The title company wired that money right back to the Russell/Penobscot bank account. When the dust settled, the Indians had their “down payment” back, plus that extra $395. The vigorish was divided: $79 was kept by the Penobscots and $316 went to Russell’s Global Direct.

The article says that the end of Down Payment Assistance Programs my be tied up in courts for years. The method in the article uses an Indian tribe as the source of funds; entities that are currently one or more steps in front of regulation.

The Penobscot operation was barely up and running when HUD, which blames down-payment assistance for $4.6 billion in losses on its mortgage guarantees, announced last year it was going to disregard down payments coming from any entity that gets reimbursed. (You’d think that this was already covered by the rule against having an economic stake in a sale, but hairsplitting lawyers can argue otherwise.)

Yesterday’s Oregonian business section was laying folded on the office coffee table this morning. Top story: “Boom builder faces home foreclosures.” It wasn’t until I got home and read the headline on the other side, “Bailout inevitable for giant mortgage firms, experts say.” We’ll come back to these; maybe not today.

This morning’s How We Live section has story on bicycling and real estate. I’m not seeing the story online yet but will update with a link when it appears (or feel free to comment with it). The timing is impeccable. The Oregonian may have scooped an upcoming AP story. I was interviewed on Monday for a story that is being written out of Seattle. I think the impetus for my interview was probably the third comment in this post, which as it states, is “just for fun.”

For me, my bike is for fun; exercise and recreation. I’m planning on riding the Peach Century out of Salem at the end of September and have done most of the organized rides around town, including Seattle to Portland, at one time or an other. I did the Boston to NY AIDS ride in 2000. But my bike is not a part of my business model. I’ll do what I can when there is no client involved (deliver fliers, etc) but I’m not a good bike commuter. I want to get from point A to point B as fast as I can and when I get there, I’m going to be huffing and puffing and sweaty, not the presentation I want. Nor does it help that we live at the base of Cornell Rd. which is roughly four miles uphill to Skyline BLVD and our office is on the other side. It might be time to do a revisit of this post, a bicycle tour of new construction written in 2005! How things have changed!

For fellow Prudential agent, Kirsten Kaufman, whom I have not met, has made the bike a part of her niche. She’s organized three Tour de Homes around the NE Alberta area where she’s taken a groups of around a half dozen to tour homes. That’s great. She’s making something work that the majority, aren’t even trying.

Continuing to build on yesterday’s post about what I think about various aspects of real estate.

Licensing and maintaining a license:
This is where I think the industry dug its own grave and then climbed in. The test was fairly easy (I took 45 minutes of the allowed four hours and scored in the high 90s (out of 100 (70 is non-passing; maybe I am a good test taker as people do fail to pass on the first try and go on to be very successful)) and realistically I never have to sell a single piece of property to maintain my license if I pay the fees and take online continuing education classes. By joining Prudential, I had an additional two weeks of training but that wasn’t transactional. Yes, a new broker has to work for a principle broker but that oversight runs the spectrum from minimal to spectacular.

My license is no different than someone that starts as a Realtor today. I think there should be a Provisional classification for those that are new to the industry or don’t complete a certain number of transactions in a year. The provisional agent would have increased oversight requirements during the transaction (review documents before they are signed rather than after). Six transactions would probably be appropriate (then you have to also consider whether dollar volume goes into the equation?). One argument against that is how do the new agents get new clients if they are branded as provisional? I don’t have the perfect answer (Casey Eye Institute charges less for Lasik if a student does it rather than an experienced doctor). It would help weed out those that aren’t selling homes but might hinder new blood from getting ahead. If there is X number of continuing education hours, some of that could be mitigated by closed transactions- No matter what, every Realtor would be required to complete a certain number of hours but each closed transaction would count as credit hours up to a maximum amount. Let’s say 200 hours are required, your first ten transactions are worth 10 hours each so an agent with no hours would owe 200 hours, an agent with 5 closed transactions would owe 150 hours and those with over ten transactions would owe 100.

I’m proposing barriers that make it harder to get over a bar I have already gotten over. So it will benefit me but I think it is what the industry needs to survive. I would have an increase in education hours. I think it is reasonable to expect that we’ll see fewer agents doing more transactions for less money per transaction as the industry evolves. The beginning of that evolution is thinning the herd.

Politicians have platforms on the issues that matter to their constituents. They’ve got hecklers that show up at their events. While they are in the majority, they tend to be the ones that get heard. I’ve got this blog and, while the bubble bloggers are the most vocal, I know that they do not make up the majority of the readership. Politicians aren’t writing for the hecklers and neither am I. I’m all for the opposing view but when the debate moves from the issues to meanness for the sake of meanness (mostly through anonymity) it takes the enjoyment out of writing the blog. But that, I suppose, is the cost of having the blog. I know no matter what I say, there are those that are going to say otherwise and some have the inability or lack of desire to say it in a constructive way. I’ve never been afraid to say I am wrong when shown to be wrong. NW Ryan is an example.

On blogging:
I know this blog is a marketing tool. I would not get up and write it if I was doing another line of work.

I don’t know if Realtors should blog. Should they become more and more hyper-local. Perhaps “Portland” is too big of a market to cover. Gresham is not a reflection of what is happening in inner-southeast Portland and vice verse. We’ve got a big area that we conduct business in but what we when we sit down with clients, the answers to the same set of questions will almost certainly differ. Real estate is local and personal. A blog has a hard time capturing that.

Realtor blogs have a hard time capturing the most interesting part of real estate because it is client related. We’ve had two listings recently where the seller has received the earnest money when the buyer has terminated the transaction. We’ve had two in two months, previously we had a total of one transaction where the earnest money went to the seller, and that was only 50% of it. Writing about it while it is happening isn’t really an option.

On “Buy Now” campaigns:
They are wrong. Speaking for myself, national and even local “Now is a great time to buy” ads are mistaken. The market has clearly declined, is still declining and we will only see the bottom when looking at history. In all markets there are still opportunities to make a good purchase today but the blanket statement “buy now” campaigns are actually ass-backwards if they are promoting the use of a Realtor. If everyone should by now, why hire a professional to help you through the process? It is the professional that tells you that in your situation buying now or selling now might not be the best situation for you that you need. It’s the Realtor that can tailor their services to their individual clients that will succeed.

On the current real estate model:
It will change. The current co-op system determines what the buyer’s agent is worth with no input from either the buyer’s agent or their client. Realtors will no longer all get paid the same for their services on the buyer side. How that change will come is debatable. The increase of buyer/agent contracts is the first step. There is room for both wham-bam-thank-you-ma’am real estate and boutique real estate. They’ll charge commensurate rates for their services or go out of business (I’ve heard three Realtors a day leave RMLS membership). That also explains why we are as busy if not busier than in previous years; we’re competing with fewer Realtors in the marketplace.

That’s enough for today.

Eighty thousand people attended the 2007 Street of Dreams in Oregon City. Four of those luxury homes are for sale and two are pending transaction. This year, only one of the homes is currently for sale. Having learned from public comment last year, they’ve revamped bigger is better and paid more attention to what will sell rather than what “is cool but I wouldn’t pay for it.” Of course, at $2M you get a lot more cool and can pay for it.

The 2008 edition of the NW Natural Street of Dreams starts Saturday (we’re going on Monday). General admission for adults is $17.50 but there are all sorts of events including the $125 black tie Midsummer’s Night Dream Event on August 25th (on Mt. Tabor, not at the site), Singles Night, Wine and Jazz Night, and Art Night to name a few. There are more details on the event’s web site.

Looking at the live webcams, there is a bevy of activity this morning making those never ending last minute touches. The event runs through August 26th.

RMLS Market Action reports that our market is pretty static and didn’t really include any surprises, good or bad. Average sales price is down 3.5% compared to July 2007 and activity remains way off last year’s numbers. We can’t say that we’ve reached bottom as we continue to trend in a downwards direction. Don’t ask how I ended up thumbing through Oprah’s O Magazine this morning but according to Suzie Orman, if you can afford the down payment and monthly payment, now is a good time to buy. Comment all you want on her statement, not the fact that I happened upon it!

2356 NW Hoyt, Portland Oregon is registered with the National Register of Historic Places as the G. & G. C. House. It is a contributing property in the Historic Alphabet District in Northwest Portland. When we purchased the house in May of 2008, that was the known history of the 1906 home.

Two events have filled in a lot of the history and brought some of the “known” history into question. We acquired the original Abstract of Title by Title and Trust Company through an Ebay auction in late July. The report outlines the property’s ownership history since it was platted in the 1800s. The two deed transfers of note are the April 3, 1906 transfer from the King Estate to Elnathan Sweet (consideration $5500 for lots 11 & 14) and the deed transfer recorded on August 4, 1906: “Elnathan Sweet and Genevieve Chapman Sweet, his wife –to—Robert F. Hall.” The consideration was $3000 for lot 11 (2356 NW Hoyt). Is Elnathan the “G.” of the G. & G.C. House? Elnathan was a know real estate developer.

The second event was a visit to the property by Robert Mercer and James Heuer of Portland State University last Saturday. They are working on a project detailing the works of Portland architect Joseph Jacobberger. We now know that Jaccoberger designed the house and that the nine pages of drawings are housed at the University of Oregon. Jaccoberger was commissioned to draw the plans by Robert Hall. Both names appear on the plans and Hall’s in 1907 Oregonian photograph of the house.

The Abstract shows the list of company stockholders and within the list is Josesh [sic] Jaccoberger, architect. The other stockholders on the list is a who’s who of Portland street names and landmarks: Ainsworth, Corbett, Honeyman, Ladd, and Glisan to name a few.

Think foreclosures are new to the market? Nope. Before the Sweets and Halls became involved in the property the Kings (think King’s Heights and King’s Addition), foreclosed on the sale of a piece of land which included the future 2356 NW Hoyt lot.