Housing inventory is rising, but the number of buyers is rising too

Cost of renting vs buyingRight now, Portland is in the throes of a very hot sellers’ market. Houses are selling as fast as they are listed, usually at list price but I’ve seen houses sell for much more than list price. It is not at all uncommon to see multiple offers on a single house the day the listing goes live. Yes, you can find properties on the market that have been listed for months and months, but lately when a house sits on the market more than a few days, it is because of one of three variables:

  1. It IS over-priced and the seller won’t budge on the price.
  2. Location – homes located in or very near heavy commercial areas, high traffic areas, or areas that are not well maintained fall into this category.
  3. It is priced above investors’ “sweet spot.” The sweet spot is a price that allows “investors,” to purchase the home, renovate it, sometimes from the studs out for huge cash outlays, and resell it at or below a price of $550,000.

Investors are out in huge numbers again. These are not the flippers of the last selling frenzy in 2012-2013. These are investment firms looking for homes, often in the most desirable neighborhoods priced in that sweet spot that their teams can renovate and still make a huge profit on.

Home buyers are frustrated. Many find themselves making offers on 5-6 houses before they finally have an offer accepted. But in the meantime, prices continue to rise.

Advice to home buyers

  • Be ready to look at any home that is listed as quickly as possible; same day listed is best, and be ready to write an offer immediately. (That’s what your competition is doing.)
  • The only time you should be considering a low offer is when you like a house that has been on the market several weeks or longer.
  • Expect multiple offers, and write the best offer you can initially. It is best to keep your offer “clean,” with as few contingencies as possible.
  • Cash is not necessarily king in this type of market, especially since rules for pre-approvals have tightened and fewer home sales are failing due to financing. (Even asking for a property inspection is considered a contingency, though inspections are highly recommended.)

To make matters even harder for buyers, sellers are savvy to this market and are rarely viewing offers the day the home is listed. All too often sellers will hold off looking at offers for at least several days to see if a bidding war occurs. They want to see the price escalate, so of course, this is to their advantage.

Advice to home sellers

Potential home sellers are torn between getting in on the hot market and waiting to see how high prices might rise. But trying to time the market is a gamble. We have no idea how long this booming market for sellers will last (though forecasts are that we will see a booming market at least through the spring and early summer months). But for those who also want to purchase a home with the proceeds of their own home sale, one has to keep in mind that the house you want to purchase is also going up in price.

March is usually considered the most active month for home buyers, though in Portland, the buyers appeared in January, and most realtors don’t see any let up in sight.

On the sidelines?

housing bubbleIf you’re sitting on the sidelines hoping that this housing “bubble” will pop; no one sees that happening any time soon. It was forecast that values would drop late in 2014, but they didn’t.

We have finally recovered from the recession in most areas, seeing at least a 25% increase in values since 2012 in almost every neighborhood in the Portland metro area. This year, lower priced homes are rising in value faster than higher priced homes. The forecast is that homes priced at $300,000 and up will see approximately an 8.3% increase in values in 2015, while homes priced under $300,000 will see value increases of 11% or more. In either event, this is a good year to get into the housing market, especially as mortgage rates remain low and really have no where to go but up.

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2015 federal and state tax breaks for Oregon home purchasers

Uncle SamIf you’ve missed the home buying frenzy the last few years, it’s not too late to cash in on some great tax breaks if you purchase a home this year in Oregon. IN fact, many of the tax breaks apply to both federal and state income tax returns, at least this year.

  1. Points – mortgage rates remain low – in some cases still under 4% for a home purchase. If you’re buying a home now and want even lower rates, you can buy your rate down and the “points” paid for that buy-down become tax deductible. However, be sure that you understand the cost of the buy-down, and the amount of time it will take to recoup your cost.
  2. Federal energy tax credits – You can still deduct 30% of the cost of installing alternative energy sources for your home, such as wind turbines, geo-thermal energy, solar energy panels, etc. So, for example, if the cost of the solar panels is $10,000, you get a $3000 tax credit PLUS the cost of energy savings in your home for years to come. This tax credit is scheduled to expire in 2016, so if you’re thinking alternative energy, be sure to get in on this savings before the end of next year.
  3. Oregon energy tax credits – there are a long list of energy saving devices that you can install in your home this year to qualify for savings on your Oregon state tax bill. These include not only the items listed in #2 above, but also items such as tankless gas hot water heater, a direct vent gas fireplace, duct sealing, solar hot water system, and much more. Click here to see the entire list of tax deductible items from the Oregon Department of Energy.

House are more than your home, they are also investments tax wise. While both state and federal legislatures continually bring up the topic of eliminating tax credits for home owners, the home builders, real estate and mortgage lobbyists are active working on your behalf to keep interest, property tax and mortgage deductions alive and well.

 

 

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Portland among 10 least affordable cities for home buyers

Google Portland map

Portland Oregon joins the list of top 10 cities in the US with less than 50% of the population who qualify for home ownership. Home prices have gone through the roof, but incomes have not kept up.

Jonathan Smoke, chief economist of realtor.com says that the forecasts point to our home prices continuing to escalate over the coming years and cautions that those who have visions of home ownership in the near future need to get moving in that direction as quickly as possible. The two most significant steps that potential buyers can take to qualify for a home purchase are save for at least a minimal down payment, and pay down credit card debt.

Following are the top ten metro areas in the list where the majority of the population CANNOT afford home ownership based on median home prices and median income. #1 is the least affordable city. Note that 7 of the top 10 cities are on the west coast.

Portland at #7, just recently attained this dubious distinction due in part to droves of people from all over the country relocating here. This has made competition for our very low inventory of homes for sale much more competitive, resulting in rapidly escalating prices and valuations. Appraisers are already forecasting approximately 8.3% increase in property values for 2015.

  1. San Diego, CA
  2. Los Angeles, CA
  3. San Francisco, CA
  4. San Jose, CA
  5. New York City, NY
  6. Boston, MA
  7. Portland, OR
  8. Sacramento, CA
  9. Seattle, WA
  10. Miami, FL
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Property values in parts of Portland Oregon forecast to rise 8.3% in 2015

Recent appraisals I have received on behalf of clients I am working with contain comments from the appraisers that property values in many parts of the Portland metro area are forecast to increase as much as 8% – 10% this year. This is in large part due to first time home buyers finally entering the housing market in 2015, and the exceptionally low inventory in the metro area.

We are already seeing a very active market this year, and unless conditions change (increased inventory, rising mortgage rates, etc.) the market is likely to remain active for the remainder of the year.

However, there are factors outside our control that could cause the market to slow. Most significant is the looming threat of Fed rate increases which could affect mortgage rates as well.

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100% First time home buyer program~no mortgage insurance

If you are a low income home buyer in Oregon, 100% financing is available, and could be the ticket to buying your first home.

What is a Key Community Mortgage?

  • 100% Financing Allowed
  • No Mortgage Insurance
  • 30 Year Fixed, no prepayment penalties

What Does It take to Qualify?

  • Property located in Low or Moderate Census tract OR
  • Borrower’s Household Income below County limit (example: $55,000 – $58,000 – depending on county)
  • 42% Maximum Debt to Income Ratio
  • Must be able to document a satisfactory 12 month rental history
  • Cannot own another home at time of closing
  • 620 Minimum credit score
  • No outstanding medical collections over $1000
  • No outstanding consumer collections over $250
  • Bankruptcies must be discharged for 48 months with reestablished credit
  • $500 Minimum investment from Buyer(principal, interest, taxes and insurance) payment is in savings at time of closing
  • Gift funds ARE allowable
  • Borrower must complete Home buyer Counseling Prior to Closing
  • Borrower’s with student loans in deferral and no payment listed on credit report will have an assumed monthly payment of 3% of the total balance
  • Rehab component is available up to a maximum of $50,000 and cannot exceed 150% of the appraised value of the property.

If buyers annual income is at median county income or less, buyer can purchase a home in any location. If income is higher than median county income, the property must be in a low census tract area.

To determine census tract for property, go to http://www.ffiec.gov/Geocode.

  • Type in property address
  • Click search
  • Click Get Census Demographic on the next page
  • Look at the box that says Tract Income level

Call or email me for more information. Your income and location of property are critical to determine if you AND the property qualify for this type of financing.

Do you qualify? Is now the time to buy your first home?

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