Portland Real Estate Blog

I was on the OPB’s Think Out Loud program discussing The First Time Buyer Credit this morning.  I come on the show 36 minutes in: Think Out Loud Home Buying (mp3).

I’d like to see the credit expanded to all primary residence purchases without increasing it from the current $8000 to see if that can stimulate the entire real estate market.  I’d support lowering it to help pay for it to- $5000?  I also think that a lot of people may find the three year requirement a challenge; things change.  Ultimately lending requirements and perhaps more price softening is what it is going to take to stimulate the $500,000-$750,000 range in Portland.

I’d also like to see it used for investment back into the house, not for a European vacation, and don’t know how you control that.  Could it be done by having the IRS give the credit and then the buyer providing an accounting of how it was spent on the following year’s returns with what wasn’t spent as taxes owed?  Then how do you determine what was a valid expense?  What about a move-in ready house or condo?  Spending $8000 might be frivolous…

The changes (not saying they are bad) in lending have taken away the ability to draw on the equity in the home which means that many buyers have lost the ability to put money into their houses after closing making the move-in ready house more appealing and taking away some of the ability to build sweat equity.

Of course, as has been pointed out, asking a Realtor if the Credit should be extended is a bit like asking the fox if the door to the hen house should be removed.  The smart fox though needs to keep  the future in mind while contemplating the present.  The Credit has helped but I don’t think the wheels are going to come off if it expires and I do think it can be improved.

Are we looking back at the bottom?  Who knows?  After peaking in July 2006, the Portland housing market dropped nearly 40 points by April of this year.  May offered a minimal bump, June added one point and July added two more to get Portland back to 150.06.  There is a three month lag in available data.

Will Congress extend, expand or let  the First Time Buyer Credit expire?

NAR says it added 350,000 sales but others point out that it was at a cost of over $40,000 per each additional sale.

What will stimulate the middle portion of the Portland real estate market?

Sales between $500,000-$800,000 are still stuck in a rut.  I’d be more likely to support something that addresses this segment of the market specifically (sure there are first time buyers in this segment but they are the exception).  If Congress is going to expand, I’d propose adding those that sell and buy a primary residence  using similar time frames as a 1031 Exchange as the qualifier (45 days to identify, six months to close) to the Credit.   Jumbo loan availability will also help.

The debate is real.  You have to be able to pay for these programs.  You could add caveats or open it up in any number of ways.  For now, we have to assume the first time buyers will have to close by November 30th to get the $8000 First Time Buyer Credit.

NPR’s This American Life program was titled “Return to the Giant Money Pool this weekend.”  It is a 58 minute podcast that can be streamed for free through this week.  Then it will be available in the archives.  I got to listen to about a quarter of the show live yesterday and will go back to catch up on the rest.

When it’s dark at 4:30 in the afternoon and raining, this video will be a great reminder as to why we choose to live in Portland.  Trying to decide what to do this weekend?  Your answer may be right here.  From the Pacific Ocean to Mt. Hood and most things in between.

© 2009 Travel Portland

I attend two Portland real estate auctions in the last couple of weeks.  The first, run by REDC featured bank owned properties throughout the area.  The second hosted by Accredited Marketing Partners focused solely on the South Waterfront’s Atwater Place.

In both cases, registered buyers could work with their existing real estate broker, required an earnest money deposit in the form of cash or cashier’s check, and had a live in-the-flesh auctioneer and had backup bidder opportunities at the end of the auction.

REDC had an online bidding system and web simulcast.  Though only one online bidder won an auction it had a global spread because of it.  The online bidders cause little or no delay in the process.  REDC also had a digital visual scorecard of the properties that had sold.  By the end of the auction, some of the first properties had come back on the market because the higher bidder could not (or chose not to) perform.

REDC had signs posted that there is a 5% buyer’s premium added to all sales and that there were undisclosed reserves; just because you won the bidding didn’t mean the seller was obligated to sell to you.  Prior to the Atwater auction I confirmed that there were no reserves.  The Atwater Place auction probably had 10 times the attendance (estimation).

Both auctions ran very smoothly, they knew what they were doing and how to handle the situation though it did appear at the end of the Atwater auction that one of the winning bidders had done “a runner.”  She was nowhere to be found and I don’t know how that worked out. One would have to expect they know how to track down a winning bidder given the registration process.

The bottom line is that though the theories are the same but the method is not.  Like any property purchase, you need to do your homework before pulling the trigger.

The National Association of Realtors estimates that an additional 350,000 people bought real estate this year because of the first time buyer credit.  Calculated Risk, in turn calculates that the cost of the $15.2B program was therefore $43,300 per additional house sold. That’s because 1.9 million people qualified for the credit.

What seems harder to gauge is what goes back into the economy.  I met with a buyer last week at their soon-to-be house and he said to the contractor, “when we close we’ll have the $8000 to spend on improvements.  We’re doing just what the government wants us to do with it.”

I’m sure there is a “for every dollar spent, $x goes back into the economy” but I can’t find it.  Clearly not all of it goes back into the economy: stuffing it in the mattress for example.

If the Credit is allowed to expire on December 1 (close by November 30th) time really is running out to have a cushion with closing.  It appears possible that it will be expanded.  Diana Olick reports on her CNBC blog:

…the first time home buyer tax credit, set to expire Nov. 30th. No question, sales of new construction have been juiced by the $8000 bonus, and without it, we could see a reverse in overall sales. This month’s home builder confidence survey from the National Association of Home Builders showed a drop in the index measuring sales expectations over the next six months.

There is a bill on Capitol Hill, introduced several months ago, that would extend the credit, expand it to $15,000 and make it for all home buyers, not just first timers. But while it was easy enough to get the credit lumped into the economic stimulus package, it may not be so easy to do it as a stand-alone bill. While some insiders tell me a small housing package is in the works, others give it a much smaller chance given how much pressure Congress and the Federal Reserve are under right now over the budget deficit.

The bi-partisan Home Ownership Moves the Economy (HOME) Act of 2009 (H.R. 2801) has been assigned to the House Ways and Means committee.

NAR and the real estate related associations are pushing hard for an extension and expansion of the Credit.   That makes sense (though it has added less than one home sale per licensed Realtor).  It certainly hasn’t hurt our industry in the short term.  Inventory has dropped but so have interest rates.  Holding interest rates low potentially is something that is available to all home owners and buyers but does not stimulate the economy with cash in hand.

A $300,000 loan at 7% for 30 years is $1995.50 per month (PI).  At 6% it drops to $1798.65 ($196.85 per month).  Over 30 years, that’s $70,866.  $8000 is recovered in 41 months (using a small loan amount will of course extend the recovery time).  Under the rules of the First Time Buyer Credit, you have to stay in your home 36 months.  I don’t necessarily subscribe to the theory that the sky will fall if the Credit expires.  It would be interesting to see it expanded to a broader buyer or help the entire inventory, not just a portion of it.  The middle of our market segment from $500k to $700k is at a near standstill.  If we can’t free it, it will continue to exert downward pressure on the entire Portland housing market.

Here’s a reminder that The Oregon Remodelers Association’s 34th annual Home Improvement Show auction event will benefit the Make-A-Wish Foundation of Oregon and southwest Washington is at 5:00PM this 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).  Tickets prices, which include admission to the show all four days, are now 2 for 1.

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. [check out the website for a list of silent and live auction items].

Wristbands for the event will be pre-sold for $55 per pair 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

It was all over by 5:30.  In 80 minutes, Accredited Marketing Partners sold 40 of the 41 Atwater Place South Waterfront condos on the auction block to a standing room only crowd.  I clocked the shortest auction at 31 seconds.  The longest was 160 seconds.  They move through a property, from brief description to “sold to bidder number [XXX]“, on average every two minutes!

The only unit that did not receive a bid was the penthouse.  First listed for $1,300,000 it did not garner the $899,000 minimum bid.  It was not the most expensive property available.  The previously offered at $1,539,000 unit sold for $897,000 (58% off asking and 128% of its minimum bid).  At the lower end, four units sold between $240,000 and $242,000 that all had minimums of $169,000.

The luxury condo auction featured property previously valued at$29,076,125.  It grossed $18,821,000 (66%) or $235,000 a second for 80 minutes.  My tracking of final selling prices may have been off slightly on one or two of the properties.

What were the expectations?  At September 13th’s REDC Auction property sold for an average of 44% of their previously valued prices so yesterday’s average was considerably higher though for the most part, the properties on offer were very different.

Will we see more auctions like this in Portland real estate market or in the building itself?  I would not be surprised to see another auction like this in either the South Waterfront or Pearl District.  The ability for a developer to rapidly raise cash has to be very appealing.  The downside is that a certain percentage of units must remain owner occupied in order to be financed down the road and there is a clear monetary hit to the bottom line (though some may be better than none).  I did not see any occupancy requirements in the terms and conditions for this auction.  If they can keep occupancy levels reasonable, it would not be surprising to see another Atwater Place auction.  Previous reports stated that even if all 4o units close escrow the building will still be less than half sold.

(Google likes my typo of caveat so much we’ll leave it be).

Searching for real estate went from book to computer based years ago. The online tools have evolved so that the consumer side of a search provides almost all the information that is available to Realtors.

The difficultly isn’t in setting up searches, it is understanding what results are or aren’t returned. Is your perfect house missing because of the search? The more details you add to the search, the more relevant the results but the more likely listings that matter get eliminated accidentally.

A case in point: The “Short Sale” field was recently added to RMLS. It’s a great tool but not full integrated because not all listings have been updated. ***The following searches will take you to TurnerRealtors.com. You can modify and save searches there.

When I search for “Short Sale” specified listings. There are 205 results. Changing it to “Third Party Approval” listings, there are 693 but in reality, most of them are probably short sales.

Of the 5130 listings in Portland, 194 of them are listed as bank owned.

Wonky results aren’t just limited to new fields that will eventually mature. Listings have some agent interpretation (or flat out errors) in them. When does the Richmond district become Hawthorne? What if it is entered as Hawhtone?

Is the den with a closet a den or a 4th bedroom? It could be listed as 3 bedroom or four.

My point is to be careful when setting up searches so that you don’t miss out on the house that was your soul mate.

Our project at 2356 NW Hoyt has closed.  The recorded sales price was $912,500.  It was not bank owned or a short sale.  The buyer would have liked to have paid less and we would have like a little more out of it.  It was not a financial disaster or boom.

• The house was on the market 305 cumulative days.  The average for the area priced between $900k-$1.2M in the last 12 months is 173 days (low 8, high 366).  We’d budgeted for a year and in retrospect should have listed once the project was complete, not as we did with 90 days before our final inspection approval.  Potential buyers had a hard time envisioning the final product and we were not flawless pricing accurately in a declining market.
• The project has not resulted in divorce or me leaving the real estate industry.  The experience makes me a better Realtor.  Anybody that tells you that there is not stress involved in a project that size is lying.  I’d do it again, but not starting tomorrow.
• We’re proud of the quality and completeness of the project.  The house is well prepared for its second 100 years.  In the debate as to whether it was a flip or a rehab, it was a flip according US Bank. They made an exception to their normal policy of not funding jumbo loans on property that isremodeled with the intention of resale because of the quality and documented completeness of the work.  This never would have been a consideration in years past.
• I wrote the buyer due diligence series of posts during the purchase of the property.  All of that remains true.  The buyer also inspected for radon and the levels required an active mitigation system to be installed.  We didn’t test for radon when we purchased the property.  We now know that breaking up the basement floor to install waterproofing and sewer/water lines may have been a contributing factor in elevating levels.  I’ll write more about active radon mitigation systems later.

The 2356 NW Hoyt chapter closes for us and begins for the buyer.  Here’s to them enjoying each other for years to come.