July 2007 is considered the peak of Portland real estate’s boom.  Since then, the housing market has dropped nearly 30% in the Metro area.

The way people are paying for homes has changed greatly too and that has affected the type of homes that are favored by buyers.  When mortgage money was widely available the fixer was popular: take a 80% conventional loan and then additional money, often up to or over 100% of the value of the home a second to reduce the cash-to-close of have money to make those sweat equity repairs or hire a contractor to do the work.  In July 2007, 85% of all home sales closed with conventional loans.  Thirteen percent closed with cash according to the report for Multnomah County I ran in RMLS Statistics.  There were no FHA loans and only 1% were VA.

Forward to today (actually June 2011).  Cash purchases jumped to 23%, conventional loans dropped to 50% and the typically low down (3% to start and now 3.5% down) FHA loans now makes up 21% of the payment methods for sales in Multnomah County.

The death of the high loan-to-value Home Equity Line of Credit has changed the profile of the homes we see selling.  Financing buyers (who still make up 75% of the market can’t take more cash to do project so the “done/finished” home makes more sense.  The cash buyer has two typical profiles: 1) buying the houses that can’t be financed and typically needs major work and 2) buyers, often retirees, downsizing into move-in ready homes.  Of course there are exceptions but these are the primary profiles we see.

The result is still the same: sellers need to look at what projects they need to complete before going on the market that will appeal to the buyers.  The buyer reaction has changed from “this will be perfect if we move this wall, gut this, and do that” to “this is too much work, let’s go.”  Sellers often don’t have the funds to do anything so picking the projects that get the most bang for the buck are really important.