Portland Real Estate Blog

The Home Buyer Tax Credit is no longer front page news but that doesn’t mean it should be forgotten. Under the current rules, enacted in November, a first-time buyer or qualifying repeat buyer, must be in contract by April 30 and close on the property before July 1. The income limits changed from the original version, a cap was placed on the the property price (not loan amount) for the $6500 credit, and someone that is claimed as a dependent can not claim the Credit. As always, if you have tax related questions, contact a CPA.

How does the Credit affect Portland real estate? In my opinion, not much. Yes, it has been a contributing factor but I don’t think it has been the savior that some cite and I don’t think the market is going to crash and burn when the Credit ends. The Credit is significant for those that qualify or decide to purchase because of it but it is not significant to the long term. NAR cited roughly 350,000 houses sold last year because of the Credit (that’s not the number of people that qualified but the number that would not have purchased had the Credit not existed). There are roughly 1 million licensed Realtors. Do the math.

If I was a buyer or seller? The Credit is a bonus. If I was planning on doing something in the first half of the year, I would do it now to take advantage of what is essentially free money. “I’m selling, it doesn’t do me any good.” Sure it does. Your house is $8000 more attractive on April 30th than it is on May 1 to certain segment of the market. If you qualify for the $6500 there is potentially $14,500 worth of Credit in the two transactions.

If I thought the market was going to drop 3% I’d be better off waiting if I was looking at roughly the average home (3% of a $300,000 house is $9,000). Some may consider the Credit as an “insurance policy” against a possible slide? The Credit is cash in your hand (once you file) versus theoretical paper money. Ultimately you have look at your situation, talk to advisers and go from there.

The Case Shiller real estate report was released this morning for November 2009. Overall, results were mixed with relatively small gains and losses nationally. Portland’s Case Shiller Index is now 150.38, up half a point from October’s 149.88. Only five of the twenty tracked markets saw gains. Four cities hit new lows in the last four years of reporting. Portland’s low was 146.85 in April. Portland’s current index puts prices at July 2005 levels.

The following graph just show Seattle and Portland’s Case Shiller Index since January 2004.

In 2008, the Case Shiller Index in Portland dropped from 178 in January to 158 by December.  The real estate market was falling while the 2008 Street of Dreams homes were being constructed in Happy Valley.  There were six homes in the 2008 show.  Two sold, two are actively listed and two were taken off the market according to records in RMLS.

Our Market Tracker graph clearly shows that the market for houses in this price range has almost completely dried up in Happy Valley.  According to RMLS there are 12 active listings in the 97086 zip code listed over $1,000,000.  The graph is current as of today and are released the first week of each month as part of our Market Tracker Report which is available for any zip code served by RMLS.  Note that the one house priced under $1M had sold by the end of 2008.

This brings us back to considering the 2010 show in Forest Heights (97229) on Cresap Lane (photos on photo blog and complete album on our Facebook Fan Page).  The show is being billed as houses under $1,000,000 so there is a market for them at this time.  The press release also states Renaissance Homes and Hearth and Home, the two builders to sign up so far, will display “presold homes” which indicates that build-it-and-they-will-come has been replaced by buy-it-and-we-will-build.  This is a common trend for new construction now rather than building spec houses.

Should the show go on?  Yes, I think it should.  We don’t go to the auto show to see the cars parked on dealer lots parked around the city.  We go to see the cars that we don’t see every day.  I doubt the car makers expect to sell a $1M car at the Portland show but they are there because even though we can’t have one for ourselves, we’re willing to pay to see it up close.  Moreover it looks like the home show is more in tune with what might sell in this market as our local builders do want to sell sooner rather than later.

This years Street of Dreams is billed as having houses under $1,000,000 in Northwest Portland.  Last year’s show was nine condo units in the Pearl District.  Whatever happened to them?  The three Waterfront Pearl units were taken off the market when the building was turned over to the lender in a Deeded in Lieu of Foreclosure action.  I could only find one of the three units in RMLS (builders/developers often put a selection of units, not all units, into RMLS).  Two of the units have sold and four remain on the market.

Turner Realtor Team members Jennifer Turner and Susan Horvat have completed the NAR’s SFR designation.  Adding to the alphabet soup of Realtor initials, SFR stands for Short Sales & Foreclosure Resource.  The SFR press release cites, “According to a recent NAR survey, nearly one-third of all existing homes sold recently were either short sales or foreclosures.”

My search in RMLS shows 4419 active real listings in Portland.  Of those 623 are listed as short sales and an additional 251 as bank owned.    That’s just under 20% of active listings being showing in the system as either short sales or bank owned.

Back in September, I attended the first REDC Portland real estate auction out at the Portland Airport Sheraton.  The group is returning for a second auction on February 8th.  At the first auction, properties sold for an average of 44% of the “previously valued at” price.  I do not know what percentage of the winning bidders closed on their transaction.

Purchasing property through an auction is the same as but different from purchasing property through a “conventional” sale.  Buyers are encouraged to inspect the property prior to the auction as there is no inspection contingency in escrow.  Many properties are cash only and cannot be financed.  Each auction house handles paperwork and documents differently- there may be paperwork that you are required to sign with a winning bid that is outside the scope of a “conventional” real estate transaction.  The paperwork is usually available beforehand so it can be reviewed and an attorney consulted if needed. REDC has a FAQ sheet that explains their process.

You have to be registered to participate in the auction prior to the event.  Don’t just show up the day of planning to bid.  REDC has an simultaneous online auction which runs almost seamlessly with the live auction.

The Portland real estate market is a part of the Federal Reserve’s 12th District.  The Federal Reserve “Beige Book” on the current state of the economy was released on January 13th (it’s 59 pages).  There is a national summary and comentary for each district for various segments of the economy.

On the national real estate market:

Homes sales increased toward the end of 2009 in most Federal Reserve Districts, except San Francisco, where demand for housing has been steady, and Kansas City, where residential real estate activity has eased since the last Beige Book. In New York, Richmond, and Atlanta, residential real estate activity was described as mixed across areas of the District. In the Atlanta District, existing home sales increased, but new home sales decreased. In all Districts, sales of lower-priced homes tended to increase proportionately more than sales of higher-priced homes, due at least in part to the first-time buyer federal tax credit, according to real estate contacts. In several Districts real estate contacts reported that the original expiration date for the credit boosted sales in November and led to a more than usual slowdown in sales in December. However, some contacts noted that the extension of the credit into 2010 could give an added impetus to the expected seasonal sales upturn this spring. Residential construction activity remained at low levels in most Districts, although home building was reported to have increased in the Chicago and Minneapolis Districts. Home prices appeared to have changed little since the last Beige Book, overall. Boston, Philadelphia, and Cleveland reported declines in home prices since the last Beige Book. Richmond reported nearly steady prices. Dallas reported some firming in prices.

Regarding San Francisco District 12 (including Portland):

Demand for housing appeared to be largely stable, while demand for commercial real estate eroded further. After accounting for normal seasonal variation, the pace of home sales was mixed across areas but appeared little changed on net compared with the previous reporting period; contacts noted that low mortgage interest rates helped to sustain sales in general. However, an extensive supply of foreclosed properties in some areas caused inventories to remain somewhat elevated, which in turn has restrained the pace of new home construction. Demand weakened further for commercial real estate, with vacancy rates for office and industrial space rising further in many parts of the District. However, one contact in the Pacific Northwest noted that the market may be approaching a bottom, citing an increase in leasing activity in response to favorable terms for tenants.

We’re getting a better look at how 2009 wrapped up with yesterday’s release of RMLS Market Action. For the year, there were fewer closings than in 2008 but not by much (18,955 down from 19,132). The rolling 12 month average sales price was down 12.1% to $289,000 (median down 10.8% to $247,000).

Compared to 2008, December 2009 was a great way to finish the year. Closed sales were up 52.6% from the previous snow battered month a year ago. 2008 ended with a record high 14.1 months of inventory that has now dropped nearly in half to 7.7 months. Sales were slower than November but that would be expected.

RMLS Market Action is one of the three sources I usually write about that cover Portland real estate. Market Action is released mid-month of the following month reported. The Case Shiller Index has a three month lag so we won’t see December ‘09 until the last Tuesday of March. Prudential Northwest Properties Market Tracker reports are released the first week of the following month and are emailed to subscribers. You can also look at the graphs from the reports on our PDXBuyers.com website.

January is National Radon Action Month.  Don’t get me wrong, radon wasn’t discovered last year.  But over the last few years, it has become on of the most common Portland real estate inspections buyers have and one that often yields results that need attention.  Radon is not isolated to one part of town.  We had results over 4.0pCi/l in every quadrant of Portland last year.  Ideally the test runs for about 72 hours in an undisturbed environment.  You can see in the chart where doors may have been opened while the test was running.  The test and system were done by Alpha Environmental.

We typically see mitigation systems cost between $1800 and $2200.   I wrote this post back in September:

The general recommendation is that any home testing over 4.0 pCi/l should have radon mitigated as it is the second leading cause of lung cancer behind smoking.

I added more photos to an album on our Facebook fan page.

The MLS number is a quick and easy way to identify a listed property.  For RMLS of Portland it has always been a seven digit number and the first number described the year it was made active: 9xxxxxx was listed in 2009.  The lower the rest of the number, the closer to the beginning of the year.  For 2010, the MLS number has added a digit: 10xxxxxx.  Once a property is listed, the MLS number stays with the property.  This means that a Realtor can pull up the listing history of a property and see when the listing was made active, sold, expired or other data was adjusted.

A listing that is canceled or expired and put back into RMLS has a new number.  This means that a 10xxxxxxx listing wasn’t necessarily newly listed after New Years.