I was forwarded a wonderful graphic by a friend that shows where all the subprime messes really are:
Map with Subprime Graph

You can see by looking at this graph that it looks like most of the problem areas are centered around metro areas where the increase of buyers from the availability of subprime mortgages fueled a huge rush of new construction. Once the speculation and overbuilding collided with the start of foreclosures it snowballed into actual problems where people couldn’t hold on through the downturn.

There was also a fundamental shift in thinking about real estate from a long term conservative investment into a short term - get rich quick with no money down scheme. If everyone was theoretically able to hold out in the long run I don’t think we’d be having nearly the problems we are. The panic has made this worse and I’m betting that late this year or at the latest in 2009 things will start to look better.

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Last week the monthly Market report was released by the RMLS and the news is good. Portland continues to have a solid market and inventory is actually going down again for the second month in a row. Based on the huge increase in pending sales last month I’m betting that this trend will continue into April. Another factor affecting the market is the long winter we’re having, once the weather finally breaks watch for another run up in pending sales. Appreciation is still a solid 5% and with many multiple offer situations this trend will hopefully continue as well.

The Inventory numbers:
January - 12.8 months
February - 10.4 months
March - 9.1 months

My prediction for April - 7.5 months
Once we hit 6 months of inventory we’re headed back into a Seller’s market so if you’ve been waiting for the right time to buy I’d say that time is Now!

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Winter finally let go of Portland for an entire weekend with a record high 85 degrees! I got out and played some tennis, got a little color, and BBQ’ed with friends. The sunny weekend was a great reminder of what we all love about living in Portland; ski and/or hibernate all winter, and stay outdoors all summer. Time to oil up the chain on your bicycle and put away the chains for your car!

Another favorite pastime for Portlanders is touring homes. I’ve been out looking a lot more lately than I was in January and February; March and April have been shopping season to put it mildly. So if you’re thinking of buying here are some tips:

Open Houses: These happen Saturday and Sunday - You can drive around looking for signs or you can call or email me and I can give you a list of opens.
Brokers Tour: These are Tuesday from 11-1pm and at many of these you get a free lunch! If you’d like to join me for the brokers tour let me know.
Scheduled Home Tours: This is when you’ve narrowed down the list of possible homes to your favorites and I schedule time to show you homes personally - I love looking at homes with clients and have seen many of the homes on the market.

So if you’re thinking of buying give me a call! Spring and Summer won’t last forever…

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Many people have been calling this for a while now but it became official on March 28th, 2008 that PMI [Private Mortgage Insurance] on Zero percent down loans is now gone. So what does this mean?…. It means that the days of buying a house with no cash at all are gone… at least for the time being. Coming up to fill the void is FHA loans which have become less restrictive and allow a purchase with just 3% down. You can learn more about FHA loans Here. PMI is generally required on loans with less than 20% down.

Click here to see James Adair’s commentary on the same subject.

In other news, this week has seen a big increase in buyers getting out there and buying; for two reasons: seasonal increases due to Spring and also buyers trying to make it under the wire with 0% down loans. This will be taking alot of inventory off the market in April and bodes well for a strong Summer to come.

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There is a definite sense that things are picking up right now in Portland. I took a look at the numbers and, Wow! Pending sales of detached homes are up 107% in March over February. Buyers are coming out of the woodworks and multiple offers are becoming common again.

Here is a Breakdown of Pending sales of Detached homes in March [actual numbers exceeded projections!]

NE: Feb 79 - Mar 158
SE: Feb 102 - Mar 215
N: Feb 38 - Mar 89
W: Feb 45 - Mar 104

Totals:
Feb 264 - Mar 566

Percent increase = 114%

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A month ago when the numbers showed that Portland Metro had almost 13 months of inventory I broke it down to the close-in neighborhoods and showed that we still have a balanced market. A couple days ago news came out that inventory has Dropped back to 10.4 months and the number of closed sales are way up over January - 28% more to be exact.

A couple more surprises… Median price is up 5.5% over last February …. Interest rates are going up very rapidly … Stated income loans are about to disappear in the next two weeks. Economists are starting to say buy now and that we might be at, or very close to the bottom. I don’t have a crystal ball but there are some amazing deals out there and they won’t last forever.

Here’s an example of the cost of waiting: Let’s say that you were able to make the payment on a $400,000 loan at 5.2% which = $1733/mo in interest [rates were at this point a month or so ago] Rates are at 6.2% and rising right now. That means the same monthly payment of $1733/mo in interest now only buys you $335,000 - that means you just might have lost $65,000 in buying power. Prices aren’t falling in Portland and even in areas where they are you still lose by waiting if interest rates go up. Here is the best explanation of how this works.

A great article about over-priced / under-priced markets and why to buy now.

Now - Don’t give up just yet. I think it is a great time to buy and you should feel good about getting in the game. The strength of the market will hopefully mean you will do well by buying and holding your home or investment property. Another thing is that rising interest rates signal a healthier econmony which means we’ll be making more and have better job security.

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With the National market in flux and certain segments of our local market slowing, buyers are looking for ways to save money and sellers are looking for a way to get out of trouble. Those two goals sometimes intersect with something called a short sale. A short sale is where a Lender agrees to let a seller sell their home for less than what is owed on the property. That is the basic idea but the reality is more complicated and the process often times takes quite a bit longer than a traditional 30 day close.

I have spoken with quite a few agents who handle short sales and bank owned properties and the consensus has been that in Portland you don’t really get a great deal and it takes in many cases 5 months to close. This is because Oregon is very under-represented when compared to the rest of the country in foreclosures and other distressed types of sales and this means that those properties often sell for close to market value. On the flip side I have clients that have bought properties for much less than market value. I think it has much more to do with the amount of inventory that bank currently holds versus the specific market.

The bottom line is that you need to talk with a Real Estate Attorney, a CPA, and an experience Realtor before you decide to enter into a short sale.

For more detailed info check out these two articles:
Selling a Short Sale
Buying a Short Sale

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You might have heard the news - it will be on the TV tonight and I wanted to point out the small print that will likely be overlooked by much of the media.

For 20 years the Case/Shiller index has tracked the rise and fall of the housing market nationally. Of the 20 areas they look at all were down except 3 - some like Miami are down as much as 17%. Three areas went up: Charlotte, N.C., 2.3%; Portland, Ore., 1.2%; and Seattle, at 0.5%.

Read the entire article here: CNN/Money

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I want to share two new tools that I think are going to become widely used by both buyers and investors.

1. Google Street View : This amazing new tool allows to walk around a neighborhood or an entire city virtually. Many of my clients are using this to further explore areas before viewing homes.

2. Zilpy.com : This great new site allows you to see what homes or apartments are renting for in any given neighborhood. This is great if you’re planning on buying a rental or keeping your home and turning it into a rental. I also suggest you look at Craigslist to see what your competition as a rentor or landlord is going to be.

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News broke this past Friday that inventory had skyrocketed to 12.8 month in the Portland Metro area, the highest level since 2000. For the previous 4 months we’ve been hanging in around 8 months which is just on the buyers side but not too much. The tipping point is considered to be 6 months.

Like many other people this new inventory report was a bit shocking to me. So I ran my own numbers based on detached homes in close in neighborhoods. I looked at inventories based on the last 6 months of sales and here are the results:

Detached homes:
97202 = 2.5 months
97214 = 3.6 months
97212 = 4.8 months
97232 = 3.5 months
97210 = 5.3 months
97209 = 12 months
97203 = 4.75 months
97201 = 8.4 months
97227 = 7.6 months
97217 = 3.6 months

Condos:
97202 = 14 months
97214 = 9 months
97212 = 11 months
97232 = 7.5 months
97210 = 10.5 months
97209 = 9.6 months
97203 = 14 months

So the news as I see it is that if you own a home close in then you are largely unaffected by the metro statistics. My only concern is that people will see the overall market conditions and mis-interpret those numbers. There are categories of properties and areas with the majority of the inventory that are skewing the numbers. Close in = OK. The big exception is condos as you can see by the higher inventory. If you’re thinking of buying a condo now is a great time to be a buyer.

Non-Conforming loan limits: You might have heard about the change in “jumbo” Loans - until last week it was any loan over $417,000. Some areas with high median prices benefitted from the change but Portland with a median price of $280,000 is too low to see any change. This would have helped buyers and sellers in the higher price ranges but no change for us in Portland.

For everyone who get’s my quarterly newsletter and gift you have already heard the good news that I am now a Principal Broker! I have also hired a full time assistant so if you hear from Yvonne LeGrice welcome her to my team!

With all the changes going on it’s a great time to buy - give me a call sometime - 503.901.8100.

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