Portland Real Estate Blog

Really briefly, Case Shiller for July came out today. Portland’s index is 174.21, down from June’s 175.03.

This second graph shows the same index since Jan. of 2006.

I’m sitting here watching the 5PM news. KGW is running a series this week on the Your Money blog. Monday night was about retirement, Tuesday, tonight, is Investment Tips, and Wednesday night is “real estate advice from the experts.” There’s no link for it yet but it should be the latest post the Your Money blog in the early afternoon.

I’m not the “Charles” that asks a question on the Retirement page and I am not tomorrow’s expert. If anyone at KGW reads this forum, it’s a great idea but really hard to read as there is no separation between the question and the answer. Either one in italics, bold or a color would make it much easier to follow.

In the last few weeks we’ve seen three big Portland area builders in trouble. Last week’s Portland Business Journal explored who that effects a little more. Subcontractor liens are way up. If a contractor doesn’t pay their subs, the subs can file lien against the property that they work on. Subcontractor liens get paid before the contractor’s construction loan.

Multnomah County reports that construction liens, also known as mechanic’s liens, have soared as contractors and subcontractors line up to secure their right to payment for work on financially troubled projects.

Contractors and subcontractors recorded 1,119 liens in Multnomah County through Aug. 31. That’s 41 more than the number of liens filed in all of 2007 and 70 percent more than the 654 filed in 2005 when the residential market was booming.

The story is similar in Washington County, where contractors filed 910 claims this year through Sept. 12, 46 percent more than for all of 2007, and 53 percent more than for the full year 2005.

The RMLS New Construction Real Estate Agreement includes this section:
Multnomah County reports that construction liens, also known as mechanic’s liens, have soared as contractors and subcontractors line up to secure their right to payment for work on financially troubled projects.

Contractors and subcontractors recorded 1,119 liens in Multnomah County through Aug. 31. That’s 41 more than the number of liens filed in all of 2007 and 70 percent more than the 654 filed in 2005 when the residential market was booming.

The story is similar in Washington County, where contractors filed 910 claims this year through Sept. 12, 46 percent more than for all of 2007, and 53 percent more than for the full year 2005.

Multnomah County reports that construction liens, also known as mechanic’s liens, have soared as contractors and subcontractors line up to secure their right to payment for work on financially troubled projects.

Contractors and subcontractors recorded 1,119 liens in Multnomah County through Aug. 31. That’s 41 more than the number of liens filed in all of 2007 and 70 percent more than the 654 filed in 2005 when the residential market was booming.

The story is similar in Washington County, where contractors filed 910 claims this year through Sept. 12, 46 percent more than for all of 2007, and 53 percent more than for the full year 2005.

CONSTRUCTION LIENS: Seller warrants and represents that from and after the date of closing, all Seller’s contractors, subcontractors, suppliers and all others who provided labor or material to the Property or who have the right to lien, will have been fully paid and/or will have released all of their lien rights as against the property.

If you think you are in a position where the property you are buying might be subject to liens make sure you seek confident professional advise, including an attorney. It is possible that liens could be filed, and be valid, after closing. Since the lien attaches to the property, you could potentially be liable for the debt.

I’m yet to come across an issue with a construction lien, either personally through our remodeling or real estate related, but it is clearly more likely to happen in this market.

First cup of coffee and the morning edition of the Oregonian. Some of the front page section headlines:

Front page of sports: GIANT KILLERS III- Okay, not really real estate related but Oregon State Beating #1 USC 37-21 helps put Oregon on the map. And it’s one of the few bits of cheery news! I’m a Lewis and Clark Pioneer. When it comes to Division 1 teams, I’ll root for the Oregon team that will move up the national rankings. If it came to the Civil War for a trip to the Rose Bowl, I’d be conflicted.

Front page of business: Renaissance Homes Files for Chapter 11, will keep operating- I’ve been amazed how busy our subcontractors have been when it comes to scheduling work. Real estate prices have declined but I haven’t seen a drop in bid for remodeling work. You’d think an increase in the supply of contractors (due to less new construction work) would result in a drop in prices. It’s probably countered by the costs associated with construction; they’ve all gone up.

Front page: JPMorgan acquires bank assets of WaMu- The news that almost isn’t news. It’s been expected that WaMu was in trouble for some time now. An auction of the bank was canceled when interest was too low between other potential buyers. WaMu may be held out as the poster child for what went wrong in the subprime mortgage market.

Also on the front page: Economic rescue hits wall- The stock market is all over the map. Down 34 last week, up 196 yesterday and down 60 as I type. A 30 year fixed mortgage is quoted as 6.09%, up from 7.78% last week. Will there be a debate tonight or a town hall meeting with Obama? Our economy is a little, if not very, scary. At least from where I sit.

***This is not a ‘how to use your 401k to buyer real estate.’ It requires both legal and tax advice from the appropriate professions. I’m writing this because it is real estate related and I think it is interesting and it clearly isn’t for everyone. I don’t know anyone personally that has done it. Smart Money has an article this month about it.

It wasn’t for me when I looked into buying property with my 401k a couple of years ago. I haven’t done the hypothetical math to see if I would have been better or worse off moving funds out of the stock market and into real estate. I’ve typically been too interested in our properties as we self manage them. Giving that away to a third party means giving up too much control for my psyche, even if it would result in a financial gain. And of course there is the risk.

The gist, as I understand it, of the using a self directed 401k in a real estate transaction is that it has to be 100% hands off. You can’t use that lovely beach-front property for personal use; even once. If you mess up the taxes become immediately due and you’ll be facing a 10% penalty for withdrawing from your 401k before age 59. You are required to hire a third party to manage the property. The restrictions are many and the penalties are steep.

I know it is possible to get a mortgage but I am not clear how it works. There are tax consequences as the mortgage is going to be in your name, not the 401k’s. I cannot reiterate seeking professional tax and legal advice before heading down this road.

It would be great if there is someone out there that has used a self-directed 401k for a real estate purchase and is willing to talk about it here. Would you do it again?

It has been said before that real estate is local. One market does not necessarily predict another. National numbers have not reflected Portland; Portland was definitely late to the “party” as property values fell. But what about within a single market itself? Ryan Frank of the Oregonian published this graphic on his Front Porch blog. It is used here with his permission. Click on the graphic to enlarge.

Even within Portland, what is going on in one area is not a representation of the overall Portland housing market. The spread between the hardest hit areas and those actually seeing some appreciation is nearly 12 points. From the Oregonian I put this data together (which is sourced from RMLS). The spread confirms much of the anecdotal “close-in has done better than the suburbs.” Does Location, Location, Location serve as the matra to this or are markets that have done okay late to Portland housing decline?

Thanks again to Ryan Frank and the Oregonian for the graphic.

“This may be the best week in 20 years to buy a house.” This is what Dave Ramsey says in the first couple of minutes of last night’s radio show. “This weekend may be the very best day…Great time to buy.” The podcast is a 20mb file.

He says he’s never made a statement like that in 20 years of programming. I’m not a regular listener so couldn’t vouch either way. We’ve discussed “Buy Now” statements in the past. It is not a statement for everyone and he makes note of that in the show (I listened up to the first break in programing; about 10 minutes). Markets are funny things. After the week’s stock market ups and downs it’s amazing (at least to me) that the Dow ended down less than 40 points.

Mr. Thrifty posted this comment to a previous post at 6:16 PM on September 18th (today). I moved it, unedited, here as it is a topic unto itself:

On Thursday, September 18, 2008 the Big Look Task Force will meet at: University of Portland 5000 N. Willamette Blvd. Portland, OR 97203 They will be getting input on critical Oregon land use planning decisions. Realtors will be there in force to try to provide additional pressure to open up farm and forrest land to rampant overdevelopement. They are also rallying against the task force incorporating anything regarding climate change into their thinking. They want anything dealing with climate change to be handled by the legislature where their lobbying dollars can buy them the strongest voice. Please join me there on the 18th to provide resistance against this ruthless and uncaring lobby who’s only interest is in exploiting Oregons precious farm and forrest land for profit.

The Big Look Task Force report is a 46 page PDF. I have not looked it over yet.

This is OAR’s position, as emailed to me:

1. “One size does not fit all” — there must be increased flexibility in our land use system that accounts for the regional differences throughout the state and allows for greater local determination of the specific needs of a community and/or region.

2. Standing — there must be clear parameters for who has standing to appeal a land use decision. Only those directly impacted by a land use decision should have standing to challenge. In addition, there must be a reduction in the number of allowable appeals if land is already zoned for increased density or a particular purpose.

3. Climate change — climate change is best addressed by the Oregon Global Warming Commission. The Big Look Task Force was given specific instruction by the legislature to examine our land use laws, and delving into the political quagmire of climate change would be counterproductive at best.

4. Accurate identification of resource lands — modern technology allows for a much more accurate determination of what constitutes “high value” farmland, and the antiquated soil classification system has resulted in “farm land” with zero to little growing potential to remain off limits to development.

5. Economic Development — there must be a higher value placed on employment lands. While the land use system was designed to protect farm and forest, the primary economic drivers in Oregon when SB 100 was enacted, the economy is far more diverse today. Our current land use system does not reflect or embrace this diversity.

I don’t have a platform on this as I have not educated myself on it yet.

For many, schools are one of the most important factors in choosing a home. A few days ago we received Portland Public Schools, “Moving Forward Together: Report on Our Schools 2008” in the mail. The report is a little hard to follow online as the print version is 26×8. The cover page is the last section of the second page of the PDF. The first page of the PDF is the inside of the trifold printed version. Our son is only 21 months old so schools haven’t factored into our housing decisions in the past. Now, when and if we move, it will certainly be a consideration.

August continues the recent declining trend in our market.

“The average sale price for August 2008 was down 9.7% compared to August 2007, while the median sale price dropped 6.7%. Month-to-month, the average sale price and median sale price are both down when compared with July’s levels; the average sale price dropped 2.7% ($331,300 v. $340,500) and the median sale price was down 2.8% ($280,000 v. $288,200).”

As mentioned last week, the report has changed how days on market is computed. Total Market Time now captures any continuous listing as long as it hasn’t been off the market more than 30 days. Canceling and relisting a property within 30 days will no longer make it appear to be a new listing. Total Market Time for August is 121 days.