Portland Real Estate Blog

Has the Portland housing market caught up with other markets?  For the last couple of years we have all heard words to the effect of, “Portland reached its peak about a year after other markets and therefore will lag a year behind finding bottom.”  You can’t argue the first part.  Phoenix had its highest Case Shiller Index number in June 2006; Los Angeles in September 2006; San Diego in June 2006 and San Francisco in May 2006.  Both Seattle and Portland hit their highest points in July of 2007.

If, and it is an if, the market has turned, the bottom for all six cities was within a three month band between March and May of this year.  The counter to the second part of the quote above was that “Portland real estate didn’t rise as much as the other markets so doesn’t have as far to fall.”  The entire Case Shiller Index was reset to 100 in January 2000.  Phoenix is at levels not seen since July/August of 2000 where Portland is at June 2005 pricing.  Portland has had two consecutive months of positive gain in the Index.  That happened in April/May of 2008 before reeling off eleven straight months of losses.

Are we looking at the bottom?

The Oregonian reports today about the funds our area has received from the Neighborhood Stabilization Program.  Through the program managed by the Portland Development Commission, eligible buyers in eligible neighborhoods can by eligible houses by making use of a $50,000 interest free second loan.  The map below is from the PDC Website and is a graphic- their interactive map should be the definitive authority.

Oregon-NSP-Property-Map. Verify on PDC website.

The Oregonian article by James Mayer cites estimates that 20 to 25 buyers may benefit from the program.  The home must be bank owned (foreclosured), in the areas the designated by the program, and cost less than $266,000 and at least 1% under appraised value.  Buyers are limited to an income limitation of $84,000: 120% of the median income for Multnomah County.

The program looks to be very much like the first iteration of the $7500 First Time Buyer Credit of 2008.  The money must be repaid when the house is sold or changes hands.  It is a loan, not a credit like the current $8000 First Time Buyer Credit which expires on December 1st if Congress does not act.  An accountant would need to verify the elibility of a buyer using both the First Time Buyer Credit in conjunction with the PDC funds.  Also note that the PDC website on the Own Your Own Loan program has some additional requirements and some that are different than those cited in the O’s article.

The Case Shiller report for June 2009 on real estate was released a few minutes ago.  The Portland index is 1.5 points since May.  This is the first full point-plus gain for the index since April/May 2007.  Prior to last month’s .12 gain, there had been eleven consecutive months of decline.

Portland’s Case Shiller Index is 148.47, about the same level as June 2005.  Both the Composite 10 Index and Composite 20 Index were in positive territory for the second consecutive month.  Portland’s peak was in July of 2007 when the index maxed out at 186.51.  Until May and June of this year, 19 of the past 23 months had returned losses.

This appears to be good news for real estate in general and the Portland housing market.  Two months of gain totaling less than 2 points could easily be wiped out by a single month but we are in a period of where we tend to see a seasonal uptick and these reports lag three months behind.

The chart above is from the June RMLS Market Action.  It shows the historical affordability of the Portland housing market.  The National Association of Home Builders publishes the NAHB/Wells Fargo Housing Opportunity Index (HOI).

CNNMoney reported yesterday on the HOI index and the most and least affordable cities but Portland doesn’t get mention.  Going into the data on from NAHB website we find Portland ranked 198th out of 226. Note that RMLS data cites the National Association of Realtors (NAR) and CNN cites NAHB.  Portland is more affordable vis-a-vis itself historically but still remains one of the less affordable markets nationally.

The typical American family, making the nation’s median income of $64,000 a year, could afford to buy 72.3% of all homes sold in the United States during the second quarter, according a quarterly report from the National Association of Home Builders (NAHB) and Wells Fargo (WFC, Fortune 500).

That’s off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable.

This offer came as part of an email I received and is reprinted here (including this paragraph) with Hoyt Street Properties’ approval.  They provide “courtesy to brokers” so the buyer can work with their existing Realtor (or us) as their representative without affecting the offer.  The seller can adjust the unit prices at any time without notice.

The Oregon Remodelers Association’s 34th annual Home Improvement Show auction event will benefit the Make-A-Wish Foundation of Oregon (and southwest Washington).  The event is at 5:00PM on Thursday, September 24th, the first day of the show, like the rest of the show, is at the Oregon Convention Center in Portland (not the Expo Center).

Guests can enjoy the show, visit exhibits and bid on tremendous packages that will be auctioned off, while enjoying food and wine from local restaurants and wineries. 100% of the proceeds from the live and silent auctions will benefit the Make-A-Wish Foundation® of Oregon.

Wristbands for the event will be pre-sold for $55 and will also allow entrance to the show throughout the entire weekend. 70% from each wristband sold will benefit the Make-A-Wish Foundation® of Oregon.

The Home Improvement Show’s hours are:

Thursday, September 24th 2:00pm-8:00pm
Friday, September 25th 11:00am-8:00pm
Saturday, September 26th 10:00am-8:00pm
Sunday, September 27th 10:00am-6:00pm

The research stems from the question, “how much should I offer a bank owned property?”

The result from running some searches:

• In Beaverton and Tigard since 1/1/2009 bank owned single family properties priced between $200k-$400k have sold for an average of 97% of asking price (70 of them).
• In Portland, the same criteria yields 137 properties that sold for 98% of asking price.
• There are over 1400 sold properties that were neither bank owned or third party approval in Portland.  Beyond the number crunching realm.  Narrowing it down to the 97214 zip code results in 42 properties that sold at 98% of asking.
• The 89 properties listed as third party approval sold for an average of 97% of asking in Portland.

Important to note that these are percentages of the most current list price, not the original list price.  The initial results appear to imply that it doesn’t matter if the property is seller owned, subject to third party or bank owned when it comes to pricing bias.

The way the first time home buyer credit is written now, you have until November 30, 2009 (109 days as of 8/13) to close on your new home (if you qualify for the credit).  Realistically, its earlier than that as Thanksgiving falls on November 26th.  I’d be planning on closing no later than November 20th and even that may not be enough cushion if something goes wrong.

Will the buyer credit be extended?  Who knows?  Congress could let it expire, extend it or change it.  The first iteration was the $7500 credit which was really a loan. Then it became a true tax credit for those that qualified under the rules of a first time buyer (interesting IRS scenarios).

On August 5th, House Representitive Harry Mitchell (AZ) said:

“The current $8,000 credit for first-time buyers has had a constructive effect on our housing market and I am happy to hear that Senator Reid supports its extension,” Mitchell said.  “But we can do more.  We should expand the tax credit by making it available to every qualified American who wants to buy a home, not just first-time home buyers, and should examine increasing the value of the credit as well…”

It looks like the next chapter is just starting to be crafted.  There are no proposals on the table, just talk.  It may already be to late to close a short sale within the time allowed. Some questions that will have to be addressed (my very partial list):

1. Should there be (should there have been) a provision/amendment for an accepted offer on a short sale pending bank approval that  misses November 30?
2. Should “first time buyer” be dumped as a qualifier?
3. Should it remain at $8000, be raised or lowered?
4. How does Cash for Clunkers effect the government’s ability to continue the buyer credit?
5. Should there be an Investor Tax Credit?  What, if any, qualifiers would you put on that?

The Federal Reserve meeting ended its two day meeting today without changing interest rates.  CNN reports, “Central bank says the long decline for U.S. economy appears to have ended, although it’s likely to remain week for awhile.”

RMLS just released its latest Market Action report with some strong numbers for July:

Closed sales in the Portland metro area for July 2009 eclipsed last July’s total by 8.6%, marking the first time same month closed sales have increased since April 2007. Pending sales also grew 8.3%. New listings dropped 25.4%.

That said, the July 2009’s average sales price is down 15.2% from July 2008.

Inventory continues to decline due more to an increase in activity than a change in the number of listings.

A few thing worth noting in the Portland real estate market:

1. The Portland Business Journal reported in Friday’s edition that Buena Vista Custom Homes has been disolved by the Secretary of State’s office.  One of the marquis Portland area builders fell victim to the housing decline and heavy investment in Happy Valley.  I showed  a barely lived in short sale on Saturday that they built.
2. The 2009 Street of Dreams has started.  We’ll be there at Wednesday’s Realtor Day.  There are discount codes available elsewhere online for a break on the $15 Pearl Pass.
3. More Portland Street of Dreams news: Ryan Frank reports on the Front Porch that the Waterfront Pearl, one of the four Street of Dreams developments has been foreclosed on.
4. We reduced 2356 NW Hoyt, the Rober F. Hall House,  to $975,000.  The number of sales over $500,000 is down significantly in 97210 and appreciation is mixed in different price ranges.  We think its a great house that is now appropriately priced for the market.  The market will make that determination.  The 15 year Special Assement tax program starts this year and has potential property tax savings of over $1000 a month versus properties not on the State Historic Preservation Office program.
5. Case Shiller reported last Tuesday that national home prices were up for the first time in three years and Portland was up as well.  I wrote about that last week.