Home energy audits to be required for all Portland home sellers beginning January 2018

 

HOme energy score report

Sample home energy audit report

Thinking about selling your house? As of January 1, 2018, *all home owners will be required to have a home energy audit PRIOR to listing your home. (Listing means using any form of public advertising including signs, RMLS, Internet ads or postings on public listing sites, etc). This new regulation applies only to homes within the Multnomah County/Portland city limits.

Before you get too excited or upset about “another regulation”, you should know that this is a relatively painless and inexpensive new regulation. Home energy audits will be conducted by licensed contractors who have been qualified as a Portland Home Energy Score program assessor. The estimated cost for an audit lasting about 1 1/2 hours will be only $150-$250. But remember, your home cannot be listed until you’ve had the audit so you will need to plan ahead.

The assessor will evaluate your home based on how energy efficient your home actually is based on type of heat, insulation, windows, etc. It will also include an estimate of the home’s greenhouse gas emissions (based on the Home Energy Score estimate of the home’s energy use, fuel types, and emission factors, provided by ODOE (Oregon Department of Energy). Assessors will NOT use your recent and current utility bills, but instead will use average use numbers as compiled by ODOE for homes comparable to yours. This is important because obviously a vacant home will use considerably less fuel than one occupied by a family or a family deliberately keeping the thermostat turned down to save money.

Once the audit is completed you will be given a report with a score from 1-10; the higher the score the more efficient it is. The report will include the following information:

  • An estimate of the total annual energy used in the home
  • An estimate of the total annual energy generated by on-site solar electric, wind electric, hydroelectric, and solar water heating systems in retail units of energy
  • An estimate of the total annual cost of energy purchased for use in the home in dollars, based on the current residential energy price of the utility servicing the building and the average annual energy prices of non-regulated fuels, as provided by ODOE.
  • The current average annual utility retail residential energy price in dollars, by fuel type and the average annual energy prices of non-regulated rules
  • An estimate of the home’s greenhouse gas emissions based on the Home Energy Score estimate of the home’s energy use, full types, and emission factors, provided by ODOE
  • The name, contact info, and CCB license number of the Assessor who performed the assessment
  • The date the assessment was performed
  • The expiration date for the Home Energy Performance Report
  • The address, year built, and heated square footage of the home

Why is Portland requiring home energy audits?

Would you buy a car before knowing the estimated mileage? Or food without nutrition and calorie counts? As a realtor, I’ve seen first hand that most home buyers want more energy efficient homes. Utility costs are definitely an important factor in affordability; and as someone who recently replaced a low efficiency furnace with a very high efficiency heat pump, I can tell you that my heating and cooling bills dropped more than 50%. I no longer feel the need to keep my thermostat low during the winter months, or uncomfortably high during the hot days of the summer. 

The audit is an additional soon to be required seller disclosure to potential buyers. As mentioned above, your recent utility bills are not the true measure of how efficient your home is. Unfortunately with ever rising utility bills many home owners sacrifice real comfort for lower bills. In addition a home with a high score could save a family up to $1000/year on their utility bills as compared to a similar lower scored home. 

Home energy audits are already required in Austin, Texas; Berkeley, California; San Francisco, California is also just adding this audit; Santa Fe, New Mexico; Kansas City, Missouri; and Boulder, Colorado. Internationally, residential disclosure policies are in effect in the United Kingdom, Denmark and Australia. Austin was the first city to implement this policy all the way back in 2009. Portland was able to model our audit program after cities that already have this policy in effect. Other cities have reported that this program does in fact reduce greenhouse gas emissions.

In Portland we take pride in being a very green oriented city, and Portland and does have a master plan to reduce greenhouse gasses by 30% by 2030. We have already been rated the fourth greenest city in the country. But besides the plan, most of us have to admit that we appreciate our clear blue skies and clean air (fire and smoke aside). We’re an outdoorsy population so this is important to all of us. 

Low cost financing available for energy efficient improvements

In 2010, the City established Clean Energy Works, now known as Enhabit, to provide access to low-cost financing for energy upgrades. Enhabit’s activity in the energy upgrade financing market has resulted in local banks and credit unions offering specialized financing products for energy efficient homes.

How efficient is your home?Energy Trust of Oregon, in partnership with non-profit lender Craft3, now offers a moderate income energy upgrade financing program. There are also new specialized energy efficiency mortgage products available exclusively to buyers of homes that have a U.S. Department of Energy Home Energy Score.

An added benefit to sellers is that homes that are energy efficient generally sell for more money than comparable homes; significantly more money than the cost of a home energy audit.

Global warming is real. All but 4 countries in the world (including the recent US entry onto this list) have signed the Paris Climate Accord. Portland has just taken another step to maintaining our commitment to the Paris Climate Accord along with most states and cities in the country.

*There are some exemptions to this ruling such as homes in foreclosure or short sale. For more rules, exceptions and exemptions, click here.  Low income sellers may qualify for assistance with the cost. 

 

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Oregon Residential Energy Tax Credits Expire Dec 31, 2017

solar panelsIf you’re an Oregon home owner thinking about remodeling or updating your house to be more energy efficient, you need to keep your eye on the calendar. Just about all residential energy tax credits will expire at the end of 2017. It is unknown if the state legislature will re-instate any of those credits next year.

There are some great tax credits still available ranging from installing a solar system for your whole house, to installing a system just to heat your pool or hot tub. OR, installing an energy efficient gas fire place or pellet stove and a whole lot more.

To qualify, you must purchase the equipment by the end of the year; it must be installed by April 1, 2018; and all application paperwork to the state must be submitted by June 1, 2018. (Usually the installer will complete paperwork for you.)

To see all the current Oregon energy tax credits (dollar for dollar credit from the tax you owe), please click here Current RETC Rates for Oregon.

Installation of a whole house solar energy system is the only remaining Federal Energy Star tax credit still available. You can recoup up to 30% of the cost of the system through the end of 2017, but that percentage will decrease after this year.

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Home buyers are back out in force in Portland

sold - sale pending signsAfter the usual slow down in property viewings for the last month or so, potential buyers are back out in huge numbers here in Portland. RMLS reports that home views increased almost 20% last week in the Portland metro area. This home buying frenzy is likely to continue until the Thanksgiving holidays if this year is like the last few years. Between Thanksgiving and and the end of the year holidays, the number of “I’m not in a hurry” home viewers tends to decline, while serious buyers continue to seriously search for that perfect home.

To make matters even more urgent for prospective home buyers, it is anticipated that mortgage rates will begin to rise beginning in October 2017 as the Feds begin selling off their $4.6 trillion inventory of Mortgage Backed Securities and Treasury bonds. The rates are expected to increase monthly through 2018 because the number of bonds being released by the Feds will increase monthly for at least a year. Rising interest rates will price many buyers out of the market as prices continue to rise.

Unfortunately the low inventory numbers of homes for sale continues to weigh on home prices in Portland. The median sales price for homes sold in August climbed to $385,000, up 9.1% from a year earlier but $10,000 less than the median price in July.

home prices increase againAverage home prices climbed above $420,000 in July for the first time in Portland’s recorded history, and with an ever growing population, this trend is likely to continue. Prices are rising faster in the Pacific NW than in any other area in the country. Portland ranks 2nd only behind Seattle for fastest rising prices.

 

All these statistics are a bit slanted though because the truth is that home prices have stabilized in homes valued at $500,000 and up, while homes valued below $500,000 are really rising faster than 9.1% year over year. There are so many buyers almost desperate to lock in a home purchase priced under $300,000 that unfortunately we have seen the return of the “lipstick on a pig” type home flippers. These flippers will purchase those properties that are in really poor condition; slap some paint on the interior and exterior, perhaps update the kitchen with new but inexpensive cabinets and appliances and raise the price to at or just below $300,000 to cash in on huge profits. However, a lot of essential repairs are left undone.

Since the under $300,000 price range is where most buyers are becoming more disheartened and a little bit desperate, it is critical to do your own limited home inspection to make sure that you are not risking your limited funds on a home that has too many problems to even qualify for financing. Issues such as dry rot, appliances and furnaces, water heaters etc. that are unsafe, roofs that cannot be certifiable for at least 2-3 years life, windows throughout the house that do not open or lock, and so much more can often be detected by the prospective home buyer.

While your earnest money deposit should not be at risk during the early stages of the purchase IF you purchased through a realtor with all the buyer protections written into the contract, you could lose valuable time searching for a better investment. Please read Tips to avoid buying a money pit to help you do your own quick inspection of any home you are considering making an offer on.

Finally, buyers should always be working with their own realtor, rather than the listing agent to make sure that their realtor is working for them, NOT the seller.

 

Good luck out there.

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Are you ready for mortgage rate increases beginning in October 2017?

Federal Reserve BldgWhile we have all been watching hurricanes, fires, earthquakes, North Korea threats, and so much more, the Feds rather quietly held their usual monthly meeting just about a week ago on September 20, 2017 where they unanimously decided it’s time for them to begin to unwind Quantitative Easing (QE).

Most recently we’ve grown accustomed to news that the Feds met and little changed. The benchmarks the Feds were looking for to signal economic health were not happening. But anyone watching the Feds knew that the news was bound to change soon; and it seems that soon means now.

Per the news conference held after the meeting, the FOMC (Federal Open Market Committee) chaired by Janet Yellen announced that they finally feel that the US economy is now healthy enough to begin to unravel QE  and let the market find its own way.

As a reminder, QE (quantitative easing was implemented just after the bank bailouts and housing market crash about 10 years ago in order to stabilize the economy as much as possible. The over night lending rate for banks and large financial institutions was dropped to zero while the Fed began buying up federal and mortgage bonds in astronomical numbers. They began unwinding that policy at the end of 2015 by gradually raising overnight lending rates which now stands at 1.25%.

The Fed currently holds $4.5 trillion in these security instruments. This buy and hold strategy has artificially held lending rates of all types, including mortgage rates at almost unprecedented low levels for the last 10 years.

Last Wednesday the Fed announced that the over the counter lending rate for banks will remain at 1.25% but QE has come to an end. They will begin selling off bonds beginning October 1, 2017 and will continue to sell monthly until the portfolio is gone,or until they decide that their portfolio is an appropriate size and the markets have stabilized. 

The starting rate of the sell off will begin somewhat slowly; next month they will sell $4 billion in mortgage backed securities and $6 billion in Treasury bonds. This number will increase monthly until the sell rates reach $20 billion monthly in mortgage securities and $30 billion monthly in Treasuries. It is expected that these levels will be reached in about a year. 

Once those bonds start hitting the free markets, it is forecast that all lending rates will increase incrementally, including mortgage rates, until the bonds are gone. As we have seen in the past, when banks feel they have any excuse at all to raise lending rates, they do so. Typically they test the waters with a bigger increase than the market will bear, so they pull that increase back slightly. But with billions of dollars worth of bonds hitting the free markets every month going forward for at least the next year, it’s impossible to predict just how quickly lending rates of all types will rise.

The Fed will monitor the rate of sales closely to ensure that we don’t see car loans, student loans, personal loans, credit card rates and mortgage rates rise too quickly, but rise they all will. Even the Feds expect that. 

IF you are thinking about selling or buying a home, this might be time to get going. These rate increases may seem small, but could definitely affect how much buyers are qualified to spend for a home purchase, especially those who are looking at homes priced at their current pre-approval limits.

 

 

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Did you know that 1 of every 3 home buyers nationwide purchase their properties sight unseen?

I have to admit that this was a surprise to me. It goes without saying that these  buyers are doing their research online and depending on photos and information that is readily available for anyone to see.

For those who are purchasing for investment or flippers who are ready and eager to find properties in specific neighborhoods with the cash and skills to rehab homes, this could be a great way to go.

But for people looking to buy a home to live in, it’s not a way to buy that I would recommend at all. Here’s why:

  1. Photos can lie
  2. Unfortunately sellers and their realtors are not always telling you the whole story about any given house. The truth is that neither the seller nor the Realtor may know the whole truth when the house is listed. But sellers may also deliberately try to hide flaws that they are aware of. For example, how easy is it to paint over a wall covered in mold to disguise the problem? How easy is it to disguise a wall way out of plumb with a refrigerator in that corner?
  3. Not all remodels are done up to the same standards. A home may photograph beautifully, but has it really been finished beautifully? Do the doors all close? Do drawers all open?

In my very humble, or not so humble opinion, there is no substitute for actually seeing a house and getting a real feel for how the house flows, and more importantly how a house feels to you. Sure a home inspection is supposed to disclose what the seller may or may not have known in terms of flaws; but remember that a home inspector is a person too and can make mistakes, or might not call out something that just might drive you crazy when you actually live in the house.

The home inspector is not there to advise you about a neighborhood or your potential new neighbors. He/she might find the foundation appears sound, which doesn’t mean that it hasn’t settled. Those walls that aren’t plumb can be a real inconvenience when you go to place furniture, or even just hang wall decor.

That being said, my best advice to almost all home buyers is if you’re not able to go see a house yourself prior to purchase, at least have someone you trust go see it for you. Please don’t base your decision on photos, videos and the description. What feels like “move in ready” to one person may not feel like move in ready to you.

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2017 Oregon Legislative session ends saving important benefits for home owner

The 2017 Oregon legislation session ended last week. Here’s a recap of some of the laws that affect home owners.

HB 2004 – Tenants Rights – failed

Just this week, the long disputed tenants rights bill failed to pass in the Oregon legislature. This is very sad news for tenants, but a huge relief for landlords. It was a poorly written bill that would have enhanced protection for tenants, but was unfairly anti landlords. Tenants will certainly be working to protect their rights again next year, and hopefully a better bill will be written and passed.

In the meantime, renters will retain the rights they already have, which differ from city to city. Before moving, renters should check with the tenants rights groups for the city they are considering moving to so they understand what laws apply to them already, and which laws do not. 

HB 2006 – Mortgage Interest Deduction – failed

This bill would have eliminated the MID (mortgage interest deduction) for individuals making $100,000 or more ($200,000 for joint filers). HB 2006 would have also capped the amount of interest that could be deducted for those individuals making under $100,000 ($200,000 for joint filers) at $15,000 on their primary residence. In addition, the bill would have eliminated the MID for second homes. This bill didn’t get the attention from the public that it probably should have, but the OAR (Oregon Association of Realtors) fought it on home owners behalf. 

With ever increasing housing prices and mortgages, this bill would have hurt just about every home buyer who paid anything close to current average prices for property, especially in the early years of a mortgage when just about all of the principal and interest portion of the payment goes to interest. The interest rate deduction helps middle class families and should not be eliminated. 

HB 2771 – Eliminating the Deductibility of Property Taxes – failed

House Bill 2771 would have phased out the itemized deduction for real property taxes for incomes between $50,000 and $125,000 for single taxpayers and between $100,000 and $250,000 for joint taxpayers. In addition, the bill would have eliminated the ability to deduct property taxes for single tax payers making $125,000 or joint tax payers making $250,000 or more in a year.

Again OAR fought this bill on behalf of all home owners. Home owners should not be the only ones who contribute to state budget shortfalls. And tenants should be equally concerned about these laws since bills eliminating tax write offs for landlords would only serve to increase rents to help those property owners shoulder the additional costs.

 

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Average Portland home prices soar to $423,700 while mortgage rates dip slightly

houses make you moneyNationwide, housing inventories have reached crisis proportions. There is a severe lack of available homes for sale everywhere. Home values are increasing an average of 5+% throughout the country. But here in the Pacific NW, home prices are surging faster than anywhere else in the country. Average prices in Seattle are up about 12% per year, while Portland in the #2 position is seeing average value increases of 10.7%.

Remember, these are average price and value increases. There are some neighborhoods with lower inflation rates, but there are also many with much higher rates. Currently zip code 97233 (Centennial, Rockwood and Mill Park) is leading the metro area seeing prices and values up 19.7% for 2016 and early 2017! This means that if you are currently a home owner in 97233, you’ve watched your home value increase about $2500 – $5000 every month for the last year and a half – depending on size and condition of your home and immediate neighborhood. Still closer in areas such as Tualatin, Tigard, West Hills, Hawthorne, Rose City, Alberta and more are also seeing inflation between 10-15% annually so you’re not being left behind. 

Spring and early summer months are the busiest months of the year for home purchases. 

Buyers are out in droves, so homes are selling as quickly as they hit the market; often with multiple offers and often selling for considerably more than list price.

According to RMLS, new listings for May hit their highest level in May 2017 since May 2008 but demand was so strong that inventory levels actually dropped .2 months (down from 1.7 months to 1.5 months once again.)

What does this mean for buyers?

If you are a prospective home buyer, once you make up your mind that you’re ready to get out and start looking at homes, there are a few things that you should get in order before you proceed. First and foremost, whether you’re paying cash or financing the purchase, get your finances in order.

  1. If you are going to be financing the purchase, get your pre-approval. This means you will need to get your paperwork together for that lender. 
  2. If you’re a cash buyer, be sure your funds are free to use (if you need to sell stocks or move funds from a retirement account, that shouldn’t be left until the last minute.
  3. If you need to sell a home, get it on the market. I know this could put you in a difficult position of needing to move in with friends or stay in a hotel if your house sells too quickly, but sellers need to know that you’re serious and you will need to present proof of your ability to go through with the purchase if your offer is accepted.

Many sellers won’t even allow you to view a home or consider an offer from you without the above business details being in order.

This doesn’t mean that you shouldn’t go out and take a look at a few homes just to see what’s available in your price range. But, it really doesn’t make a lot of sense to just go out looking at lots of homes until you’re a serious buyer because prices and values are moving so quickly. The home you’re viewing today at $300,000 will cost and be worth considerably more in 6 months. Still some looking around in advance will help you understand better what your dollars will buy in different neighborhoods, and that’s a good thing to know as you begin this process. 

Strike while the iron’s hot

Boom markets never last forever. The markets ebb and wane all the time. But the old adage to “strike while the iron’s hot” has never made more sense.

strike while the iron's hotMost buyers are not looking for their forever house. They just want a home of their own and the stability of knowing that their monthly payments are locked in (other than tax and insurance increases). Of course obvious. Your purchase starts making you money in the form of equity often before the transaction even closes, and of course the tax advantages can’t be overlooked either. Mortgage interest, property taxes and even mortgage insurance are all tax deductible, so your monthly income rises once you become a property owner.  

 

You might like to read 15 fastest selling neighborhoods in Portland as of June 13, 2017

 

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Pacific NW cities dominate fastest rising home prices in the US

Portland skyline with Mt Hood

Seattle skyline

Portland skyline with Mt Hood

 

 

 

 

 

 

 

The 20 largest cities comprise the list of metro areas that most economists watch as they compile statistics about how most of the economy is functioning. Of course, the same 20 cities are those that are most watched for housing market statistics and trends. In the Pacific Northwest, the most watched cities are Seattle and Portland. AND, Seattle and Portland are #1 and #2 cities in the country with the greatest price and valuation increases for 2016 and into 2017. 

For several years since the housing recovery began Portland topped the list of 20 with the fastest rising housing prices in the country, but we’ve dropped to the #2 position as Seattle has surged ahead of us. Currently Seattle is seeing average 12% annual home price increases, while here in Portland we’re close behind at 10.7%.

Average home prices in Seattle reached $700,000 last month while Portland home average prices increased to $425,000

Like Seattle, in Portland new home construction homes are the priciest; renovated old turn of the century homes are almost as costly, while mid century homes are where the “bargains” can be found.

Developers are snapping up run down mid century homes where they can split the lot and build 3 skinny houses at a huge profit. But developers also love the high end neighborhoods and have no qualms about tearing down those beautiful old estates to cash in on the higher prices of new construction homes.

 

 

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Mortgage Rates dip again

Mortgage rates have backed off the highs we saw right after the start of the year when the stock market went into overdrive. There were lenders quoting rates at or near 4.5% at that time. The good news is that rates appear to be below 4% again, so if you’re thinking of buying, this is still a good time. Who knows how long this will last? Just a reminder that you need to shop lenders. Rates can vary as much as 1/4% – 1/2% from lender to lender. 
 
The average home price in the Portland metro area has again topped $400,000. This also means tthat homes priced below $300,000 are becoming harder to find, even when they are fixers, and they sell quickly. Single family detached homes priced below $200,000 have all but disappeared now though there are still condos and town homes available from time to time. With the higher prices, we’re seeing much more home sales activity in outlying areas in NE and SE Portland. According to RMLS statistics neighborhoods east of I-205 are seeing a surge in popularity and in fact a few neighborhoods are reporting more sales in 2017 than some of the very popular close in areas like Multnomah Village, Concordia or Hawthorne. 

For those who are waiting for the inevitable slowdown in housing prices, it is forecast that we are unlikely to see that until 2020 because economists at city planning say that the Portland metro area is currently about 24,000 housing units short of demand and it will take that long for developers to catch up. 
If you are “forced” to buy a home further out from downtown, I wouldn’t fret about it. I doubt it will be long before the bellweathers that forecast that a neighborhood is great, like the opening of a New Seasons or Trader Joes always seem to follow where the population is moving, so watch for news that a new store is opening in outer NE or SE Portland.

By the way, for those of you on the west side, Forest HIlls, Bethany, Beaverton, Tigard, and HIllsboro are still right up there for number of sales as people continue to buy on the west side of town too. In fact, Forest Hills/Bethany had the most sales during the fist quarter of 2017.

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FHA and VA raise loan limits in Oregon

We thought it was never going to happen, but rising home prices and values have finally caught the attention of the powers that be and both the FHA (Federal Housing Administration) and VA (Veterans Administration) have finally increased loan limits to $408,250 in the Portland metro area and in Yamhill County. That’s a pretty decent increase from $368,000. Conventional financing, (Fannie Mae and Freddie Mac) have also increased loan limits to $424,100.

If you live in other counties in Oregon, please check to find out what your current FHA loan limits are. It appears from a brief check that VA loan limits are the same as the new FHA limits in all Oregon counties.
 
This is no way keeps pace with the ever higher prices in our area, but it will make purchasing a home easier for many buyers, especially those who are using FHA and VA financing.

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How long do hot water heaters last? Is it time to replace yours?

tags on hot water heatersDo you have any idea how old your hot water heater is? There should be a tag on the front of your water heater that looks similar to the photo. At the very least it should have the model number and serial number so you can google those numbers to find out the age. But many more labels are similar to the photo with the actual age the unit was purchased and installed in your house.

The BAD news is that most home water heaters are too old to be considered safe anymore. The average life span of a water heater that has been well maintained is only 8-10 years. After that many will develop leaks that could lead to flooding and expensive damage to your property.  The good news is that water heaters are relatively inexpensive to replace. Read more about saving money if you replace your hot water heater this year…

If you’re even thinking you might move one day, rather than purchasing another water heater that stores water, you might look into an instant on hot water source. Yes, they cost more, but:

  1. If you purchase a qualifying instant on hot water system, you will qualify for an Oregon tax credit (which can offset part of the cost of the unit).
  2. Your investment will increase the value of your house – and the more energy efficient items you have in your home, the higher the value (up to 4% more than a comparable home in the same neighborhood with a lower energy score.)

Most states offer tax credits and other forms of rebates to property owners who install energy efficient appliances. In Oregon, energy saving appliances and home improvements could qualify for both an Oregon state tax credit AND an Energy Trust of Oregon rebate for the 2017 tax year. Unfortunately, all federal tax credits for energy improvements expired in 2016, and to date there has been no discussion about extending those credits for 2017.  

 

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Housing market takes off like a rocket in Oregon and Washington in 2017

 

lockbox activity end of Jan

RMLS reports showed massive increases in buyers looking at homes during the week ending January 22, 2017. Washington viewings were up 54.3% while Oregon viewings increased by 47.8%.

It is not unusual to see almost frenzied buyer activity during the month of January. We’ve seen it every year since the housing market recovery began in 2012. This year buyers are citing the added pressure to find a home as quickly as possible because we are seeing significant increases in mortgage interest rates which has many buyers scrambling to lock in a their home before rates go any higher. Buyers are very aware that banks will have free reign to start raising rates as quickly as possible this year, especially since President Trump has been saying that he will be rolling back many banking regulations via Executive order very quickly. The only thing that has kept a slight damper on massive rate hikes since Trump’s election is competition. Banks do want your business, so they can’t charge ahead and start increasing rates willy-nilly so to speak.

But in talking with mulitple mortgage lenders, I’m finding that rates are anywhere from 1/2% – 1% higher than they were just a couple months ago. Last week, lenders quoted best 30 year mortgage rates ranging from 3.8% – 4.5%!  That’s a huge range, so it definitely pays to shop around. The average rate quoted was 4.25% for all the lenders surveyed.

One of the factors that is hindering buyers in the Portland metro area is the extreme shortage of inventory. As of the end of December 2016, inventory had again dropped to almost record lows at 1.3 months (the amount of time it would take to sell all inventory if no new listings are added.)

Buyers do need to be aware that the shortage in inventory with high demand WILL push prices higher. If you couple the higher prices with higher rates, unfortunately many potential buyers could find themselves priced out of the market.

You might like to read How inflation affects your ability to buy a house ~ perhaps more than you think. 

 

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President Trump signs executive order eliminating the 1/4% FHA mortgage rate cut just announced

A new President, a new day! But not a good day for first time home buyers nor President Trump supporters.

With one quick stroke of his pen, on day one, President Trump took back the FHA mortgage insurance rate cut that had just gone into effect on January 9, 2017. For the average home buyer using FHA financing, this will cost each of you an average of $500 per year. Here in the Portland area, this will cost you between $700 – $900 per year. Not necessarily a deal breaker for many of you, but why in the world did he do that?

FHA has the reserves now to support this rate drop. Perhaps you should ask him.

Please read the article just published yesterday about this rate cut for more information

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FHA lowers mortgage insurance premium for most home buyers – maybe?

In an effort to attract more home buyers to the FHA financing option, on January 9th, FHA announced a reduction in the monthly mortgage insurance premium that most home buyers will pay by 25 basis points for new mortgages closing on or after January 27, 2017.**

FHA says that they have finally reached a stable point in their finances after the enormous losses they endured during the housing collapse. The last four years of housing growth and stability has allowed the FHA to recoup their losses and they want to pass some of these savings on to home buyers to make housing more affordable.

To put this into perspective, for a mortgage of $368,000 (the maximum allowable mortgage for the Portland metro area at this time), this would equate to a monthly savings on your payment of approximately $76.00 (an annual savings of $912).

However, it’s important to remember that mortgage rates have risen over the last several months. We are no longer seeing the low rates we had grown accustomed to over the last 4-5 years at below 4%. Average 30 year fixed rate loans as of today are around 4.25%, even for those with the best credit. So this .25% rate reduction for FHA mortgages only partly offsets the rate increases. Still, every little bit helps, and FHA is the best financing option for prospective home buyers with less than 5% down payment.

In contrast, a conventional home loan will cost the home buyer more to purchase. While there are conventional loans requiring as little as 3% down payment, these are available to only those with the best credit scores; AND the mortgage rate rises for buyers with less than 20% down. FHA rates are the same for those with low down payments  and less than perfect credit, though there is a minimum credit score requirement of at least 620-640 at this time.

**NOTE: I apologize for this footnote, but just as I hit publish on this article, the following news came across: As of yesterday, National Mortgage News reported that Trump is recommending that this reduction in mortgage insurance premiums be delayed until it can be further reviewed by his new Secretary of Housing and Urban Development Ben Carson. This is purportedly just one of the Executive orders that he intends to sign as soon as he is inaugurated.

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2016 Portland housing market wrap

Final housing stats for 2016 are out. There weren’t many surprises, but there were a few.

Overall, the market was not quite as hot as 2015. Total sales were down a bit for the year, but not by much. According to RMLS, “Activity was cooler in 2016 than in 2015. Comparing all of 2016 to 2015, new listings (41,121) increased 0.7. Closed sales (32,798) decreased 1.5% and pending sales (33,234) decreased 3.9%.”

2016 housing market value increases

Housing values increased by an average of approximately 11.4% for the year for all homeowners throughout the Portland metro area. (Of course, some neighborhoods saw bigger increases while others saw a bit less. But there were no neighborhoods that saw values decrease during the year.) So, for those of you still on the fence about buying, owning a house is not only a good way to stabilize the percentage of your monthly income that goes towards putting a roof over your head; it also makes home ownership a very good investment for your future.

shopping for a houseAs of the end of 2015, the average home price was $347,000 but by the end of 2016, that number had risen to $395,000! Clearly Portland is no longer a low priced city to retire in. There has been a lot of speculation about whether or not we are soon going to be the next Seattle or San Francisco in terms of home values. That remains to be seen, but Portland is still a lot more affordable than either of those cities which in part is what is driving so many migrants to our area.

Extreme weather caused slowdown for housing market in December 2016

December 2016 experienced quite a slowdown in home purchases and listings with the extreme weather we experienced for much of the month, but that should come as little surprise to anyone. January 2017 is also off to a bit of a slow start with the recent snow storms, but is expected to pick up as the snow melts away and warmer, or at least drier weather returns.

Get your buying hats and shoes on. Housing inventory closed out 2016 at only 1.3 months (the number of months all houses would be sold if no there were no new listings.) But, we are seeing quite a lot of new listings hitting the market already this month, so we expect buyers to hit the streets as we have seen in January for the last few years. 

In case you missed it, you might want to read Seattle – Portland fastest rising home prices nationwide

 

 

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Feds raise rates today – how will that affect you?

Today the Feds announced just the second rate increase since 2008. The justification for the rate increase was that the economy continues to get stronger and move closer to the 2% inflation rate that the Federal Reserve considers a solid rate of inflation for a healthy economy.

Fed speak indicated that it is anticipated there will be 3 more rate increases in 2017. 

Federal funds rates do not directly affect mortgage rates but…

Federal funds rates are the rates that banks charge each other for short term loans they need to keep their reserves at a set level to ostensibly prevent another bank melt down.

The federal funds rate can directly affect the cost of housing, rates paid on credit cards, auto and other installment loans and student loan rates.

Mortgage rates are not directly tied to federal funds rates, but banks do find ways to pass on current and anticipated future costs to consumers. With the forecast that bank short term borrowing rates are likely to increase at least three times in the next year, banks are already looking at the losses they will be incurring on the hundreds of millions of 30 year fixed rate loans with rates at and below 4% that have been funded over the last 8 years; as well as losses they will sustain on new mortgages funded now before more rate increases kick in during the coming years. 

However, to put all this in perspective, the banks have been paying basically zero per cent over the last 8 years, while the lowest mortgage rates funded during that same time period was 3.5%. Not to mention that banks have been charging fifteen to twenty percent on credit card debt. This is why most banks are not hurting at all, and in fact have been more profitable than ever over the last several years since the recession ended. 

As regard mortgages, as of today, the average rate for a 30 year fixed rate loan has risen to 4.3%, up from 3.5% available from many lenders to the most qualified buyers just a few weeks ago. 

Still on the fence about buying a house? The forecast is that rates will continue to rise which will reduce buying power for most applicants. It is possible mortgage rates could rise as much as one per cent in 2017. If you’re currently home shopping, be sure to keep in touch with your lender AND keep your pre-approval up to date so you’re aware of how much you can afford at all times. 

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Seattle – Portland fastest rising home prices nationwide

sold - sale pending signsAccording to the S&P CoreLogic Case-Schiller home price index, Seattle and Portland are leading the country with the fastest rising home prices in the twenty major metropolitan areas they follow. Seattle has had year over year price increases of 11% annually through September 2016, while Portland follows right on Seattle’s heels at 10.9%. Remember, these are average prices and some neighborhoods within these metro areas have seen prices rise much more dramatically year over year. 

According to Professor Gerard Mildner at Portland State University’s Center for Real Estate, the issue is that developers are just not building enough housing to meet the demand. He added that here in the Portland metro area, “We’re building about 20 percent fewer housing units in the last three years as compared to the years between 1990 to 2007.” At the same time, our rate of growth as been explosive with as many as 150 new residents moving into Portland every single day! That number varies from report to report, but numbers I’ve seen range from as low as 112 daily to as high as 165 people migrating into Portland daily. 

Housing inventory has sat at or below 2 months (the time it would take to sell all listed homes based on current demand if there were no new listings) for the last few years, and demand is on the rise with recent rate increases. 

How much has demand risen?

Lockbox activity 12-4-2016

Just to give you some perspective on demand, check out the chart issued by RMLS that shows the amazing increase in number of home viewings the week ending December 4, 2016!

Since the election, rates have been rising at the fastest pace we’ve seen in years, so buyers are jumping off the fence and getting to work finding that new house. On average rates are up at least 1/2% in the couple weeks! 

 

 

 

Is Portland experiencing a housing bubble?

The general consensus is NO. 

First of all, the population and business influx that we are seeing in this decade did not exist prior to the housing collapse on 2007-2008. Sure we saw people moving to Portland from all over the country, but the jobs increases due to the movement of big industry creating satellite offices here is a relatively new phenomenon. 

We have not seen the wage increases that would support price increases continuing at the rate we’ve seen over the last 3-5 years (up 32.5% in the last 5 years), but the lending guidelines (assuming that they are not over-turned with the new administration) are so much more stringent that current home owners and buyers are not nearly as likely to default as they were during the recession. High risk banking and lending practices and loan products have all but disappeared. 

Home ownership remains an American dream

Most  people interviewed want to be home owners. There is stability in knowing what your housing payment will be from year to year (versus rapidly rising rents); and where else can you see as great a return on your investment as current home owners are seeing?

As mentioned above, until supply catches up to demand, housing prices in Portland will continue to rise. At least that is the forecast until at least 2020. To be sure, the rate of inflation in housing values will slow as supply catches up to demand. There could even be a 10% price reduction in the next 10 years, but if your home value has increased by 30% and more, that’s not devastating, especially if you know your housing payment will not increase. 

Please read more in the article published by Ettro Capital in November 2016.

 

 

 

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Housing market forecast for 2017 – Portland Oregon

Housing prices UPHousing prices and mortgage rates have very different factors driving the direction of both. If rates rise, will housing prices drop? I’m asked this question all the time. Many people assume that rising rates should cause housing prices to drop.

The truth is that no one can say for sure what’s going to happen with the housing market in the future. We know for a fact that both prices and rates are cyclical; but that’s because of all the many outside factors that influence the two markets. And to be sure, it’s important to remember that these are two very different markets.

Mortgage rates are tied to the Mortgage bond market

When demand for mortgage bonds drop, the yield on the bonds tends to rise and mortgage rates will follow suit. The demand for bonds tend to rise when Wall Street is in a slump. This causes the price for bonds to rise, so the yield drops and rates drop too. Conversely, when the bulls take over Wall Street, as we are seeing since the recent presidential election, institutions sell bonds and buy stocks. As bond prices fall, rates rise.

It would be an over simplification to say this is always true – there are always other factors that are part of this equation, but in general, WATCH WALL STREET! There is no doubt that when the Feds stop buying mortgage bonds to keep that market stable, mortgage rates WILL rise. The 10 year Treasury bond yield, which historically mortgage rates tended to mirror has risen more than 1% since the elections, and mortgage rates have followed though not quite as quickly. Mortgage rates bottomed at around 3.5% and that rate was available as recently as a few weeks ago. As of today, average 30 year fixed rate loans are available at 4.3%.

Housing prices are tied to supply and demand

Unlike mortgage rates, the price of housing is dependent primarily on supply and demand. When inventory is very low, as we have seen in Portland since about 2012, housing prices rise until inventory catches up, or demand drops.

Here in Portland the forecast is that housing prices WILL CONTINUE TO RISE for at least the next couple years. It will take that long for there to be enough inventory to meet the demand. Though, if mortgage rates rise dramatically, many potential home buyers will be priced out of the market.

Why is housing inventory so low in the Portland metro area?

  1. Migration – there are far more people moving into Portland than out. As of 2015 migration numbered approximately 112 people moving into Portland every day! Portland’s population is now at approximately 2.5 million residents and still growing. More recently we are hearing migration numbers have increased to closer to 150 new residents every day.
  2. Jobs and the economy – Industries are moving into Portland bringing some of their own employees with them, and boosting the economy by adding jobs for local residents. Recently, Amazon announced that they will be opening a giant warehouse in Washington county that will employ approximately 1000 people! Add this to Uber, Google, Airbnb, Ebay, plus all the smaller tech start ups, and you can see that there are jobs in this area, and people migrate to areas where employment is available.
  3. Climate – Unlike California and much of the southwest, Oregon has a fabulous moderate climate. Yes, it does rain approximately 141 days of the year, but most of those days we see some sunshine too. And the temperatures are moderate. We have few days below freezing or above 90 degrees. The rain keeps Oregon green and water prices low as compared to much of the country. 141 days of rain means we rarely have water rationing. There’s plenty of water to go around, even for those who like long showers. 
  4. Competition from institutional buyers – with prices relatively low and on the rise, institutional buyers such as hedge funds find Portland a great place to invest so they buy up much of the lower priced housing; competing directly with home buyers who actually live here. Unfortunately they hold these properties as investments and drive up the rental costs along with the housing prices. 
  5. Green economy  – Travel and Leisure magazine ranked Portland the greenest city in America in 2015. 
  6. Millenials are moving to Portland in huge numbers due to all the above factors and have been choosing Portland since around 2010.

All these trends are likely to continue which will continue to contribute to ever higher housing prices.

 

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Election is over – watch mortgage rates rise

The election is over, and whether you supported Trump or Clinton, we all have to face that we are now looking at President-elect Donald Trump. As you know, he promised when elected, during his first hundred days he would push to roll back much of what President Obama accomplished. Unfortunately for consumers, this means much of the consumer protection legislation that was passed could disappear or be seriously revised. 

Since the recession, the Feds have kept interest rates low and continued government subsidies for mortgage bonds to keep mortgage rates low. However, Fed Chairman Yellin has already signaled that an interest rate hike in December is likely and that mortgage bond subsidies will end at that time.

Mortgage rates up approximately 1/2% in last few weeks

In the meantime, mortgage rates started rising even before the elections, and have picked up speed since the results were announced. Lenders tell me that average mortgage rates are already up about 1/2% in the last few weeks. Corporate America and of course this includes banks, are thrilled about the plan to lower taxes on the corporations and the wealthy. If you couple those tax cuts with regulation roll backs, who really knows where mortgage rates could go? 

One of the potential Fed Chairmen that Trump has been talking with has said that it’s time for rates to return to a more normal level. This means we could be looking at as much as a 2% increase over the next 2 years. That would normalize our mortgage rate environment which many of you may have forgotten typically runs around 6%.

Stay tuned. This could be a very different year than the last eight years since the recession. 

 

 

 

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Fall and early winter are best seasons for both home buyers and sellers

Fall colors

Fall colorsLate October through the end of December  are always the best months for home buyers and sellers to either get their properties listed or hit the streets in search of the perfect house. This may sound counter-intuitive, but the reason is low inventory and serious buyers.

Relatively speaking few people list their homes during the latter part of the year, especially as we move closer to the holidays. Home owners get involved in home decorating, holiday shopping and of course, all those special holiday activities. They’re busy and don’t want to be bothered with keeping their homes as clean and orderly as possible for potential buyers.

Buyers also get busy, but serious buyers are looking to take advantage of less competition, hoping to avoid bidding wars and perhaps more negotiating power with sellers. Besides, even if they cant close a sale prior to year end, moving into a new home is a great way to start a new year. 

Feds meet again in December

The Feds are scheduled to meet again in December. The elections will finally be behind us, but there has been a lot of talk about raising interest rates one last time this year. Wall Street has seen corporations reporting strong earnings for the 3rd quarter of this year which makes it even more likely that the dreaded rate hikes could be upon us sooner rather than later. 

There are even rumors that the Feds will back off on their massive purchases of mortgage bonds low which have been keeping mortgage rates so low since the recovery began in 2012. Remember, even a small increase in mortgage rates will affect your buying power.

So, whether looking to buy or sell, don’t write off the later months in the year. 

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Should Portland home sellers be required to get a home energy score before selling?

energy star logo as seen on most appliancesThe city of Portland is proposing that all Portland city residents be required to have an energy audit and obtain a home energy score prior to listing their homes. There are approximately 160,000 single family homes in the city of Portland, but fewer than 2% of owners have an energy score. Why does this matter?

As shoppers, and we’re all shoppers, we want as much information about what we’re buying as we can get. We look for labels on food, automobiles, energy labels on appliances, etc. But home buyers want more information, and without an energy audit and score, that information is not readily available.

The framework for energy audits for houses in Portland was first established in 2009. By 2013, the training program for certifying energy scoring professionals was underway, and yet, here we are close to the end of 2016, and fewer than 600 Portland houses have had an audit done.

Portland has a Climate Action Plan that proposes that by 2050 Portland will reduce carbon emissions by 80%. But how can we achieve that goal without knowing how much carbon is emitted into the atmosphere by each house without audits? We already know that residential buildings account for approximately 50% of the total carbon being released into the atmosphere from buildings. (According to the proposal, “By April 2017, 80 percent of Portland’s commercial building square footage will be reporting energy performance.”)

More about energy audits

Before everyone panics, you should know that an energy audit takes only 45 minutes to an hour to complete, and costs only approximately $150-$250 per house. On the upside, a house with a high energy score will generally sell for up to 4% more than one with a low score, or no score at all. (With average home prices in Portland now around $400,000, you just might net a lot more money when you sell your house.) So, in spite of a lot of opposition, this is really a no brainer for both buyers and sellers alike IF the proposal is drafted property (see below for reasons to opposition). Most home owners are upgrading their homes all the time. So why not pay a little extra for more energy efficient appliances, better insulation, and regular home maintenance to improve your energy score? It makes your home more comfortable to live in and reduces your energy bills to boot.

The other upside to going energy efficient is that there are both state and federal tax credits for many of these purchases, as well as rebates issued by Energy Trust of Oregon, and sometimes even the approved contractors who install these purchases. I’ve even been told by one prior client that installing an electric heat pump instant hot water system was almost a net zero purchase with all the credits he received for the purchase. AND, of course, if you’ve ever looked at your Portland water/sewer bill, you will have noticed that the sewer portion of the bill is usually higher than the water usage portion of the bill. With instant on hot water, you’re not paying for all that water that runs down the drain while you wait for the hot water to get to your kitchen, bathrooms, and laundry room.

And one last benefit is that with a good energy score, when you sell your house, you qualify for appraisers who are certified to value your home with your energy upgrades. That is no small bonus these days when all too often homes are appraising lower than actual sales price.

How will this information be passed on to prospective buyers? Home owners can obtain a score at any time and report their scores to the city of Portland via mail, fax or online. The city will make this information available on Portlandmaps.com, and of course, listing agents will enter this information into the RMLS when the house is listed.

Why so much opposition to requiring energy audits?

According to PMAR (Portland Metro Association of Realtors), this proposal is poorly drafted.

  1. There aren’t enough certified auditors yet, and most who are certified are also selling some of the “green” products you might purchase anyway.
  2. There are multiple scoring systems. In any given metro area, the scoring model must be consistent so consumers will understand the reports and scores.
  3. We are already experiencing an appraisal crisis here in the Portland metro area. It’s not unusual for it to take 4-6 weeks and even longer in more outlying areas to get an appraisal done. Are there enough appraisers out there who are certified to value energy efficient homes?
  4. The audit must be completed prior to listing a house. For someone who is ready to list now, this could delay that transaction, perhaps for months. This could potentially be a disaster for someone who has just lost a job or is experiencing some other type of life crisis.
  5. Why are banks exempt from this disclosure?
  6. Why are rental properties exempt from this disclosure?
  7. Finally, why does this proposal apply only to homes within the Portland city limits? Does this mean that home buyers in Washington, Clackamas and Clarke counties don’t care about energy efficiency?

What other cities have passed similar policies?

Several U.S. cities have passed similar disclosure policies for their market, including Austin, Texas; Berkeley, California; Santa Fe, New Mexico; and Boulder, Colorado. Internationally, residential disclosure policies are in effect in the United Kingdom, Denmark and Australia. The reduction in carbon emissions is apparently already noticeable where audits are required.

Please read the full scope of the proposal for more information.

 

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Leading economist says Portland home buyers ARE at risk of being priced out of the market

Housing prices UPHome buying has become an exasperating experience for buyers across the nation. With high demand and ever increasing prices, the fear is that before buyers can find a house that suits their needs and budgets they will be priced out of the market.

Leading economist and Nobel prize winner Robert Shiller of the S & P Case-Shiller housing price index recently wrote a column for the NY times about this very subject.

According to Shiller, unless you are trying to purchase a home in Portland or San Francisco, your fears are perhaps a little overblown. “There is reason to believe that double-digit increases won’t continue for long in individual cities,” Shiller writes. “Short-term variations abound, but for the most part, the differences in long-term home price increases in individual cities are about plus or minus one percentage point annually.”

Shiller went on to add that San Francisco and Portland are notable exceptions to the above where home prices have grown almost two percentage points above average annually since 1987. According to Shiller, the primary reason for Portland’s explosive increases in home values is the incredible population growth which demographers project will continue at least until 2050!

Migrants are NOT the only ones buying homes in Portland

Wall StreetCompounding the problem of too few homes for the growing population in Portland is the fact that huge investment companies are not only buying the big multi-family properties, they are also investing in single family homes too, and have found that east Portland is especially attractive because of the lower prices relative to those in the rest of the metro area.

Unlike years ago, where big investors, such as Hedge funds, insurance companies, pension funds, and the Berkshire Hathaway scale of investors were interested only in commercial properties and multi-family buildings of 100 units or more.

Big institutional investors are buying up Portland because our property values are relatively low and there are no other safe havens for the type of money they have to invest. The stock market is too rocky while bonds offer little to no returns. These investors are parking their funds where they see growth above average growth potential, and Portland is one of those markets.

“A series of reports by the nonprofit Investigate West found that Wall Street was scooping up single-family rentals in Portland by the hundreds. And where did one of the investors – Blackstone, a multinational private equity firm – raise some of its capital? Oregon’s own Public Employees Retirement System, or PERS. (Investigate West found that Blackstone had invested in more than 45,000 single-family rentals in 14 areas around the country, but not in Oregon. Another company, American Homes 4 Rent, pursued a similar strategy in Portland.)” When investors buy single family homes, they usually buy in bulk and pay cash, and so are directly competing with the average Portland home buyer.

The recent rent hikes in both housing and commercial buildings may be only the beginning of the hikes to come as these investors see current leases expiring.

 

 

 

 

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Portland housing value increases top the nation again – How high can we go?

Housing prices UP

Housing prices UPAccording to Standard & Poor’s Case-Shiller home price index, Portland again had the fastest increasing home values in the country for the 6th straight month. Of the 20 metro areas that Case-Shiller watches most closely, there were only three cities that have shown double digit increases in home values over the last year. Seattle and Denver rounded out the top three.

According to Case-Shiller spokesperson, the Pacific Northwest has been the hottest region in the country, with no slow down in sight. It’s the law of supply and demand, and with 500 migrants moving to the Portland metro area weekly, there is a real shortage of housing that cannot be overcome over the short term.

Portland average home values inch above $400,000 for the first time ever

The average price of a house sold as of the end of May was $402,500 while the median price hit $354,500! Listing prices have increased as well, with the average price of properties currently on the market now at $383,000; up 11.8% from this time last year.

Portland inventory held steady from April at 1.4 months (the number of months all homes would be sold if no new homes are listed), but that’s a long ways from 6 months which signals a balanced market where inflation in values drops back to a normal pace of approximately 3% annually.

Across the country, housing prices have increased a more normal 5.8% average. The big builders should be dancing in the street if they weren’t being forced to pay so much for land, and jump through so many hoops to get approvals for new developments.

How high can prices go?

At some point, this rapid increase in prices and values will have to slow. Wages are simply not keeping pace with this pricing inflation causing more
buyers to be priced out of the market everyday. But for now, forget the lotto – owning a home is raising the net worth of home owners throughout the Pacific Northwest. And Portland is still the lowest priced big city on the West Coast. 

 

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Portland home values soar 17% in last year ~ average home prices hit $385,000!

sold - sale pending signs

sold pendingAs of the end of the first quarter of 2016, houses within the Portland city limits have soared an almost astonishing 17% over the last year (according to Zillow). Throughout the rest of the metro area home values are up approximately 13% – not quite 17%, but still a very good return on any investment these days. In many areas of Portland, housing values have hit record new highs, and just keep rising.

To make matters even worse, inventory dropped again to almost new record lows of only1.3 months (the time it takes to sell all the houses currently listed if there are no new listings). Many buyers I work with say that trying to buy a house is almost like having a second job. It is not for the faint of heart or those who are easily discouraged. Buyers need to be ready to get out and look at new listings the day it goes active because any house could be sold in just one day, often with multiple offers. And buyers need to be ready for “rejection.” It’s not unusual for buyers to make offers on many houses before they get one accepted. This is not personal folks. Money talks.

Buyers – don’t even think about a low ball offer; not in this market (unless the house has been listed longer than a week or two.)  Sellers know this is their market and most are prepared to wait for the right offer to come along. 

Average home values in Portland metro area hit $385,000

It’s true that the averages include the prices of homes in the highest priced areas of Portland;  but this is the highest average price we have ever seen, and it’s just going higher. With big industries moving into Portland and employment on the rise, there are more buyers out there with bigger budgets helping to push prices up. 

Home buyers with lower budgets should consider the suburbs

The typical Portland suburb does NOT look like this. This is a photo of a suburb in Las Vegas.

The typical Portland suburb does NOT look like this. This is a photo of a suburb in Las Vegas.

The “dreaded suburbs” has many would be buyers thinking gloom and doom. Millennials and those with larger budgets have their eyes on being close in to down town Portland and are willing and able to pay the higher prices. Just last week in the very popular Hawthorne/Belmont district there were only 3 listings.

But the suburbs aren’t the end of the world. There are some really beautiful neighborhoods outside of the I-5 corridor. With home values up at least 13% over the last year those who move to the suburbs are still making a very respectable return on their investments! Of course, it’s always possible that many of these suburban neighborhoods will sprout little boutique shopping areas too, and in time, you might find that you actually like where you were able to buy at a lower price. You get a lot more house for the money in the suburbs. Remember that the Division shopping area didn’t appear until PokPok restaurant opened and that was only 10 years ago.

Businesses are also moving to the suburbs

It’s not new that businesses are moving out from downtown Portland. Property costs are  lower in the suburbs, so many big companies choose to build their campuses further out. Look at Intel, Nike, Columbia Sportswear, and all the high tech companies out in Beaverton and Hillsboro; or Xerox, Sysco Food Systems, Mentor Graphics and Flir Systems down in Wilsonville and you’ll find those suburbs are where the employees are moving to be closer to their jobs; and their housing markets are thriving too. As a lot of start ups are moving into Portland, we’re finding that many of them are also locating out in the suburbs. 

At some point, housing inventory will catch up to demand, and the market will slow. That 13% return on your investment will definitely help you purchase another house, perhaps in a more desirable location if you choose to. You’re certainly not going to see that kind of return paying rent (which is also increasing at unprecedented rates of 14% per year). Buyers need to remember that a house is more than just a place to live; it’s also an investment for the future. It’s not even unforeseeable that housing prices could dip again one day. It has happened many times historically, so it could happen again.

When will the housing market craziness end? Is this just another housing bubble?

We’re hearing “bubble” everywhere, but few analysts or economists think this is a bubble. Portland property values have been lagging behind all the major metro areas on the west coast forever. It is in part why 500 people are moving to Portland every week. And of course, that high rate of migration into Portland is fueling our high demand and low housing inventory. Plus approximately 25% of all home sales are cash buyers! With all these factors in place, this housing boom was predicted. Even Forbes magazine named Portland one of the housing markets most likely to outperform this year. That prediction is certainly coming true now. 

However, virtually everyone believes that the market will cool, but very likely not before 2018. It will take that long for inventory to catch up to demand. Note, that cool is the word here, not bubble bursting. Eventually the housing market will stabilize and we will retreat to more normal 3% annual home value increases. But inventory has to rise to more like 3-6 months before that will happen. For better or worse, this is our housing market now, and anyone who wants to buy a house has to play in this market. It’s quite an experience. 

What about buyers with budgets of less than $300,000?

Buyers with budgets of less than $300,000 absolutely should be looking outside the inner corridor to find a home, especially if they need a house with 3 bedrooms and 2 baths. Inside the inner corridor, few homes are priced below $300,000 and most are major fixers or tear downs and often require cash buyers. But even close in to I-205, home prices are rising almost as quickly as just across the interstate. Neighborhoods like Park Rose, Maywood and Mill Park took off last year. Others further out such as Milwaukie, Gladstone and even Gresham were among the hottest selling neighborhoods in the metro area. And on the west side, Beaverton and Hillsboro are definitely hot too. 

You may even find that you like living in the suburbs where there is less traffic and your money allowed you to buy a larger home than would have been possible closer in. And with the exception of the new housing developments, most Portland suburbs do not feature “every house looks the same” type of atmosphere. Most of our suburbs are a great mix of older homes, lots of mid-century style homes (which, by the way are definitely coming back into vogue), as well as newer infill homes. There are lots of quaint tree lined streets and evidence of pride of ownership further out. Stranger things have happened, and it could happen to you.

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Portland home prices hit new median highs as of end of 2015

It’s official. Throughout the Portland-Vancouver metro area, home prices have hit new median highs as of the end of 2015. All four counties have surpassed the values and prices last seen prior to the housing crash of 2007.

What’s driving all this growth? I’ll recap some of the reasons covered in the past, and add a couple new reasons that aren’t as common knowledge.

  1. Approximately five hundred new people are taking up residence in this area every week and they need a place to live.
  2. More high paying jobs are being created as technology businesses create outposts and new offices in the Portland area.
  3. The extreme volatility in the stock market has many investors re-thinking the wisdom of investing on Wall Street. Institutional investors are buying up the Portland housing market and are aggressively competing with all cash offers often at premium prices as they consider our market a better investment than Wall Street. Portland is currently the 2nd most desirable area for institutional investors in the country.
  4. Mortgage rates remain low for those still financing their purchases.
  5. Millennials have entered the housing market.
  6. Record low housing inventory has buyers driving up prices with bidding wars as new buyers try to get into the housing market. This is especially true for houses priced at or below $400,000.
  7. Builders have been very much behind the eight ball in catching up to housing demand; though big developers such as DR Horton and Lennar Homes just completed purchases of huge tracts of land. Still it will be a couple years before they are able to sell houses on those parcels because plans must be submitted to cities for approval of developments and of course the infrastructure has to be completed before they can even start building houses.

It seems that every day new articles cross my desk talking about just how hot the market is in Portland, but the prognosis for how long this housing boom will last continues to be extended. Last year the “experts” were saying that we would see a robust market at least through 2016, but now some experts say that with the unprecedented job growth, low housing inventory, and rate of migration to this area, our housing market may very well not slow down until sometime in 2018! 

 

 

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Which Portland neighborhoods saw 20+% median price increases in 2015?

median price increases in Portland

 

Did you know that RMLS now breaks up the Portland metro area in 122 neighborhoods (primarily for statistical purposes)? While most neighborhoods throughout Portland saw median price* increases last year of 10% and more, a few just rocked the statistics with greater than 20% median value increases in 2015. Several of those areas have been rising stars for a few years now, such as Woodstock, Cully, Kerns, and Sabin, but there were some surprises east of I-205, such as Mill Park, Park Rose, and Centennial. But the biggest single median price gainer was East Columbia which saw a 42.1% increase in median prices for the year!

It’s true that a few of the neighborhoods that saw the biggest increases were lower priced areas (average home list prices below $250,000), but a few now have median prices at or above $400,000, so price was not the single factor that contributed to the gains. However price has been a factor in driving attention to those areas that have emerged over the last few years.  

How did your neighborhood fare? Check out the interactive map here, along with a chart with even more statistics by neighborhood. (Please note that the interactive map includes a second map showing neighborhoods outside Portland city limits). And if you’d like even more information about the value of your house these days, please feel free to contact me directly and I’ll be happy to do more research for  you.

Overall, real estate remains on fire throughout the Portland metro area. Bidding wars continue to be the norm, especially for homes that are basically move in ready. It’s becoming increasingly difficult to find any listings priced under $225,000 anymore as avearge and median prices continue to rise due to demand exceeding inventory. This trend is expected to continue at least through 2018, when it is hoped that new construction will catch up to demand. 

 

*median price = half of all homes sold were above prior median price and half were below

 

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The average home in Portland Oregon increases in value $2.82 every hour

girl saving pennies in piggy bank

Did you know that the average price of a home in Portland has risen to $357,500 as of the end of February 2016? That’s a huge increase over the average sales price of $283,300 at the end of February in 2013. Put another way, a home owner who purchased a home in February 2013 at an average price of $283,300 has seen their value increase by $74,200! That means that home owner was actually earning $2.82 in equity every hour from the day they closed until now.

Remember this represents an average price and value increase over the last three years. In some areas of the Portland metro area, values were increasing at a much higher rate, and of course the reverse is true that many areas saw lower rates of inflation.

For those who are still waiting to buy a home, or are trying to save for the down payment, are you saving at a rate of $2.82 every hour?

Yes, this is all based on averages. Not all future potential home buyers can afford an average priced house or $357,500. If this is you, should you just give up on your dream of home ownership?

The truth is that  less than half of all home buyers can afford an average priced home in Portland anymore. These last two years in particular have seen an explosion in home values due to low inventory, low mortgage rates, and the number of competing buyers (which is being exasperated by the high migration rate to Portland. 

Many buyers are moving further out from downtown to make the dream of home ownership a reality. The end result is that prices east of I-205 and south of I-84 are now sky-rocketing too.  Yes, the hottest neighborhoods are still predominantly close in to downtown Portland, but areas way further east, such as Gresham, or southeast, such as Oregon City and SE Portland are in high demand lately, and this is likely to continue as we move through 2016 and even into 2017-2018. In the southeast, Woodstock and Milwaukie have seen almost astonishing growth. 

Where will the next hot neighborhoods be?

There is really no definite way to predict which areas will take off and become the next Alberta, Sellwood or Hawthorne, but buyers should look for anchor restaurants that see a lot of traffic. Just look at what happened on Division Street after PokPok opened just 10 years ago. Also watch for great little coffee shops to open nearby. Sure Starbucks is a good indicator, but a boutique coffee shop where residents are comfortable hanging out with laptops and tablets are even more significant. Little shops are likely to follow to hopefully cash in the traffic generated by the anchor establishments, and a new “in” neighborhood can emerge. You’ll know your area has fully emerged if a Trader Joes or New Seasons opens nearby, but that takes a while. 

In the meantime, enjoy your new home and work with neighborhoods to beautify where you live.

Your piggy bank will thank you. 

 

 

 

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16 signs your home is seriously dated

maintained bodyHomes are a little like people. They require continual maintenance and updating to maintain their integrity, appearance, and safety. Potential buyers to your house will watch for any features that spell money to them after the purchase closes. But beyond that, failure to invest in proper maintenance and updating WILL cost sellers money, and can be dangerous to current residents.

Obvious signs that a home has not been well maintained or upgraded in a long time:

  1. Fuse boxes – especially a fuse box with only four fuses! Fuse boxes haven’t been installed in new construction in decades with good reason. They simply don’t have the safety features that new circuit breaker electrical panels have. Yes, fuses trip or burn out if over loaded, but it was too easy to bypass those safety features and create a fire hazard in doing so. In addition, there are no fuse boxes out there with enough capacity to handle new appliances, big flat screen TVs and sound systems, computers, and all the new gadgets that are being manufactured every day to safeguard your home.
  1. Old electrical panels – especially where additional panels have been wired into the original panel, or where there are signs of cobwebs, frayed wires, etc. inside. Electrical panels need to be replaced to accommodate new technology, or can also be a fire waiting to happen.
  2. No GFCI outlets – especially in any room with water access such as bathrooms and kitchens. Again, these are dangerous and should be upgraded. Electrical shock and potential electrocution are the obvious readily apparent dangers here.
  3. Aluminum wiring According to the Consumer Product Safety Commission, homes wired with old technology aluminum wire “are 55 times more likely to have one or more connections reach Fire Hazard Conditions than is a home wired with copper.” Enough said.
  4. Old furnaces that obviously have not been serviced regularly (if there are dust mites inside, this furnace needs at the very least, a good cleaning and inspection). But buyers are also looking for energy efficiency, and old furnaces were not built nearly as energy efficient as newer models. If you have an old furnace in your home, make sure it is cleaned and serviced prior to listing, and if possible get your servicer to write up a letter stating that the furnace is in good working condition.
  1. moss covered roofMoss covered roofs – If your roof is so covered in moss that you can barely see the roof, most buyers will assume this roof needs replacing. At the very least, have that roof professionally cleaned and inspected.
  2. Carpet in the bathroom – This is a definite replace it now situation. It is not only unsanitary, but mold can be hiding in and under the fibers of the carpet.

 

 

More flags that will cost home sellers in their ultimate sales price

  1. Wall to wall shag carpeting is definitely out, and if stained or has well-worn or bare patches, dollar signs are going off in your buyers’ heads.
  2. White appliances – especially if they are old. White appliances have been out of favor for a decade or more, and especially those older electric stoves with coils rather than flat surface tops. Even worse are appliances in colors such as sage green, gold or beige.
  3. Busy dated wallpaper and bold colored paint. Remove both and go neutral with your color scheme.
  4. Brass fixtures (lighting, drawer pulls and door knobs) really date your home.
  5. Linoleum
  6. Tiled counter-tops – OK – you love that electric blue tile, but it will be the very rare buyer who loves it as much as you do. And the grouting is very hard to keep clean and sanitary.
  7. Formica counter-tops – enough said.
  8. Popcorn ceilings – These are not only dated, but in a huge percentage of homes built prior to 1978 or so, contain asbestos. Popcorn ceilings definitely have to go. But be careful about doing it yourself before you have it tested for asbestos.
  9. Wood paneling – We’re not talking log cabins here or beautiful wood details such as wainscoating. We’re talking about the inexpensive wood paneling that was so in vogue half a century ago. If you can’t afford to tear those out and sheetrock the walls, at least paint them a neutral color.

Remember that home buyers have their eyes on their wallets

If there is anything in your house that seriously needs updating, sellers should always consider making those upgrades before listing. Buyers almost always over-estimate the cost and time to do those upgrades themselves and will low ball sellers to the extreme IF they make offers at all. All too often buyers won’t even want to go see a house with photos showing white appliances, popcorn ceilings, wood paneling and gold fixtures. 90% of buyers out there are looking for move in ready.

If you Mr./Ms. Seller are looking for top dollar for your house, talk to your realtor® about what not upgrading your house could cost you in real dollars and cents. Remember the more potential buyers you can attract, the more money you will make on your sale.

 

 

 

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Portland tops the list of fastest rising home prices in US for last 3 months

home price appreciation 2015 in USAccording to a recent article in the Oregonian, Portland continues to lead the nation with the fastest rising home prices in the U.S. with prices rising more than 10% in 2015 (followed by San Francisco and Denver. Seattle and Dallas were the next runners-up with price increases above 9%). For the last couple months of 2015, and now two months into 2016, the market is screaming hot and home prices just keep rising.

For those considering buying a house, you should know that prices for starter homes are closing in on $300,000 in most of the Portland metro real estate market. To be sure, there are homes still priced in the low to mid $200,000 – $250,000 range, but with more buyers than available properties, bidding wars are the name of the game. Within hours of being listed, sellers will receive often multiple offers, resulting in a sale price 20-30% higher than list price.

I’ve heard it many times, “I’ll just wait for the market to cool off.” But the forecast is that the demand is so high most economists forecast that this condition is likely to persist well into 2018 (when it is anticipated that new construction should catch up to demand.)

Where are houses priced under $250,000 in Portland?

If your budget and pre-approval is for less than $250,000, you should be looking in SE Portland. I know, everyone wants to live as close in to downtown as possible. The “hottest” neighborhoods are moving east too. It used to be that everyone wanted to buy west of 82nd Street. Last year that barrier moved to I-205, and this year we are looking at almost anywhere between I-205 and 130th as hot neighborhoods. But there are pockets east of 130th that are getting to be equally as hot.

Currently prior overlooked neighborhoods such as Maywood, Park Rose, or Mill Park are becoming the Montevillas and Cully neighborhoods of last year.

How to spot neighborhoods on the rise

Forecasting where the new boutique areas will pop up is tough, but here are some signs to watch for:

  1. Restaurants opening to anchor a shopping area – remember that Division street started with the opening of Pok Pok and just expanded from there to be one of the hottest little neighborhoods in town.
  2. A great little café offering freshly baked pastries and more atmosphere than a Starbucks.
  3. Nearby strip malls that can easily become little boutique malls.
  4. Small boutique type shops squeezing into more commercial strip malls.

You will know the neighborhood is “on the map” if a Trader Joes or New Seasons market opens nearby. But by then, it’s already too late to get in on what has already become a trendy neighborhood.

 

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Job growth driving huge migration of new residents to Portland

According to the Oregon Office of Economics, approximately 40,000 people are moving to Portland every year. These new migrants come from everywhere and include all ages and ethnic backgrounds. The biggest numbers of migrants are those in the 20-30 year age group and are well educated, even if many are unemployed. That may seem like an oxymoron, but for the educated, areas with high job growth are natural locales for seeking employment. And the young are generally more mobile than any other age group.

Most people move for two economic reasons; jobs and housing costs.

Portland has been leading the country for migration, and our pace of people moving into this area far exceed the number of those leaving.

Because there are so many people moving to the Portland area unemployed, our unemployment rate is higher than most cities in the country. While 50,000 new jobs have been added since the recession, this number is not nearly high enough to accommodate the number of new job seekers who arrive every year, never mind put back to work those who lost their jobs during the recession.

The good news is that picture is changing this year. Currently Portland is adding approximately 4,000 new jobs every month, so at this current rate, our unemployment numbers should start to drop at least in line with the rest of the country.

Housing is an issue though that has everyone concerned. As our housing prices continue to rise, more current residents find themselves priced out of the market. In some areas of the country, housing starts are up, but Oregon starts remain relatively flat which has caused our inventory to hit alarming lows – down as low as 1.2 months inventory at the close of 2015. Optimistically speaking, the hope is that housing starts will increase enough to keep up with demand within the next 1-3 years which should stabilize housing and rental prices.

Oregon Office of Economics forecasts “By this time next year, if our forecast comes to pass, employment in Oregon will have fully caught up to the population gains since the onset of the Great Recession.” Hopefully our housing needs will catch up to our needs within the next few years too.

 

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Forbes names Portland housing market as one of eight cities most likely to outperform in 2016


portland housing pricesForbes Magazine
recently released their predictions for the 2016 national housing market. They forecast which cities are most likely to outperform or underperform the rest of the country. The predictions are based primarily on job growth and housing affordability. Portland was named as one of the housing markets most likely to outperform the rest of the country.

While Portland housing prices seem high to many long term residents here, and to outsiders considering a move to the northwest, our home prices are still low relative to other major cities on the west coast, which is why some of those cities are on the most likely to under-perform even with strong jobs numbers.

According to Forbes, “the candidates that are among the top performers in regards to both rising home sales and home prices will generally be out West and in the South. Salt Lake City, Portland, and Riverside will likely experience a good year in the West.  Atlanta, Charlotte, and Tampa look solid for gains in the South. One Midwestern city will shine and that market is Grand Rapids. For the Northeast, Providence could surprise us.” With the exception of Providence, all these cities had more than 3% job growth during 2015 though Providence was not too far behind.

The under-performers forecast all experienced significant job losses, and historically, as job trends go, so goes the housing market.

Job growth driving huge migration of new residents to Portland

According to the Oregon Office of Economics, approximately 40,000 people are moving to Portland every year. These new migrants come from everywhere and include all ages and ethnic backgrounds. But the hugest number of migrants are in the 20-30 year age group and are well educated, even if many are unemployed. That may seem like an oxymoron, but for the educated, areas with high job growth are natural locales for seeking employment. And the young are generally more mobile than any other age group.

Oregon is in fact a state of migrants. 51% of all current residents are from a different state or country. Yes, it’s true that the majority of migrants are from California and New York, but all states are represented and 15% of the migrants are from outside the US.

So far it seems that all major housing analysts are predicting a very strong year for the Portland real estate market in 2016 as compared to the rest of the country.  

Want to know how your neighborhood ranks in terms of sales and pricing? Check out the links below to learn more about where homes are selling the fastest and at the highest prices. Close in neighborhoods dominate both lists, but there are many more suburban neighborhoods on these lists too.

Don’t blink: Here are Portland’s 25 fastest-selling neighborhoods in 2015

Portland’s 25 priciest neighborhoods of 2015

 

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Portland home sales for December 2015 blast through all prior records in pricing and number of sales


sold pendingThe Portland Oregon real estate market closed out December 2015 on fire. While home buyers typically take a break during the holidays, there was literally NO slowdown in the Portland housing market. Sold and Sale pending signs dominated the landscape throughout the metro area.

December 2015 sales were 21% higher than those for December 2014, and were the most sales ever recorded for December in the Portland metro area in the 24 years these records have been maintained.

Average home prices also rose in December to $367,000, up $36,000 from last year during the same month, and up $20,000 from just one month earlier in November 2015.

Portland home inventory drops to lows not seen since 1999

Due to the surge in buyers, real estate inventory dropped to 1.2 months (the number of months it would take to sell all houses on the market if there were no new listings). This is the lowest housing inventory Portland has seen since 1999.

According to RMLS statistics, 2015 beat out 2014 on all averages including number of pending sales, closed sales, new listings, sales and median prices.

Many realtors and lenders credit this surge of home buying activity to the anticipated rise in mortgage rates, which fortunately has not yet occurred. But we can’t lose sight of the fact that rents in this area are rising so fast, that for many, home ownership is actually cheaper than renting, and offer the advantage that monthly payments are locked in for the life of the loan (principal and interest).

Analysts predict drop in number of home buyers in 2016

For 2016, some analysts are predicting a slight drop in the number of home buyers as rising prices could price them out of the real estate market. But with rents rising as fast, if not faster than home prices; some of those renters could get more motivated to buy a house as quickly as possible; if for no other reason than to lock in their monthly housing payments.

In fact we are already seeing price increases on existing listings; and new construction is already pricing higher for homes under construction than buyers paid for identical homes during 2015.

Buying versus renting – tough call for many Portland area residents

Research and sales show that a large percentage of renters would like to be home owners. But with rents rising as fast, if not faster than home prices, it’s becoming increasingly difficult to save for a down payment. Many long time renters could get more motivated to buy a house as quickly as possible if for no other reason than to lock in their monthly housing cost.

For more information about what is driving the Portland metro real estate market, you might want to read:

Portland among top four housing markets in the US

Businesses moving to Portland citing affordability as #1 factor

Zillow rates Portland among top 10 housing markets for 2016

Portland rents among fastest rising in the country

 

 

 

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Portland among top four housing markets in the U.S.

Move over Silicon Valley. The hottest tech sectors in the U.S. are now Boston, San Francisco, Seattle and Portland.

Portland skyline with Mt HoodAccording to a spokesperson at Redfin, “We’ve talked a lot this year about the great tech migration and how the influx of tech companies, tech workers and tech money is affecting the real estate market in places like Portland, Seattle, Denver and Boston. It should be no surprise that major tech hubs were home to some of the fiercest bidding wars this year, but even we were taken aback when we crunched the numbers to find the nation’s most competitive neighborhoods for home buyers in 2015.

The 30 most competitive neighborhoods of 2015 were all located in just four cities: Boston, Portland, San Francisco and Seattle. The rankings are based on several indicators of competition, including the percentage of homes that sold above asking price, how quickly homes went under contract and the percentage of Redfin offers that faced bidding wars.” In fact, the rankings on the charts below were compiled based on a lot of Redfin broker stats, so other reports could differ somewhat from this list.

As has been reported previously, Portland has been aggressively courting technology companies, and the tactic is working. Many of the high tech industry giants already have offices here, and new tech start-ups are locating here attracted by the relatively lower cost of living as well as other amenities that Portland offers.

As you can see from the chart below, according to Redfin, Portland’s hottest neighborhoods included Hawthorne, Belmont, Brentwood, and Woodstock. Check out the columns showing percentage paid above list price, price increases, and percentage of cash buyers! While most tech businesses report that they are looking for their talent first in the talent pool within Portland, they all too often find themselves being forced to recruit from around the world to find people with the right education, skills and experience to fill the positions.

This is in no way meant to imply that only the four neighborhoods named below were hot in 2015. All of the Portland metro area has been feeling the pressure in the housing market; due to new residents, home buying college graduates, and current residents who are looking to become first time home owners, or to move up or down within the markets.

New and expanding businesses are locating throughout the metro area, and of course, every buyer is looking for different features in their neighborhoods.

Home buying in the four cities mentioned Redfin’s report has definitely become challenging and the forecast is that this trend will continue well into 2016.

REdfin statsREdfin stats2

 

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How do lenders determine your mortgage rate?

Libor Index graphicMortgage rates are tied to a variety of indexes such as the mortgage bond index, the LIBOR index, etc. These indexes change continually which is why mortgage rates are an ever moving target, though usually stay within a relatively small range on a daily basis.

Banks will add their profit margin to the index rate to determine their “best rates” at any given time. “Best rate” is the key here though. Depending on the type of mortgage you are applying for, your lender may make adjustments to that “best rate” based primarily on your credit score and amount of down payment.

Conventional financing (Fannie Mae loans)

Mortgage rates chart Oct 15 through December 10, 2015

                               As you can see from the above chart, mortgage rates change frequently

After the recent housing crash when so many home owners who had adjustable rate mortgages lost their homes, most buyers who qualify are opting for 30 year fixed rate mortgages.

IF your credit score is at least 720 AND you have a 20% down payment, AND there are no recent prior derogatory credit issues (such as short sale, foreclosure, bankruptcy), AND you don’t need a co-signer, you should qualify for the best conventional rate you see quoted all over the Internet. But remember that those posted rates may be quoted just once a day, while rates can move up and down, even during the course of a single day.

Important note: Rates quoted on the Internet are often for adjustable rate loans or include a buy down cost.

The reality is that mortgage rates are all about risk. Currently mortgage rates are very low compared to historical averages. This is risky to lenders because you are locking in your rate for 30 years. Banks are all too aware that means that if you keep your house and take the full 30 years to pay it off, they will likely experience an interest rate loss on you at some point during that 30 years as mortgage rates rise. That’s why they build in a substantial profit margin over the rates they are paying to borrow money to lend to you.

If your credit score is below 720, or if you have less than 20% down payment, or if you can’t qualify based on just your own income; you are considered a higher risk, so you will be charged a higher rate to minimize that risk to the lender. We refer to this as “risk based adjustments”. Also, the type of property you are purchasing can trigger risk based adjustments. For example, you will pay a higher rate if purchasing an attached condo. You very likely will not be able to purchase a manufactured home even if you own the land under it, nor a floating home, even if you are also buying the slip, with conventional financing.

ARM (Adjustable rate mortgages)

Adjustable rate mortgages are still available. You’ll hear them referred to as 5/1 ARM, 10/1 ARM, etc. These loans have a locked in fixed rate for 5 or 10 years, or whatever type of ARM you have, but then the rate can (and usually does) begin to rise, as often as twice a year, and up to 2% at a time. For the lender, this means you are assuming some of the interest rate risk so ARMs are generally offered at lower initial rates than 30 year fixed rate loans. It is highly advised that unless you are absolutely sure that you will sell your home prior to the end of the locked in rate period, because the rates increases can be quite a shock to most home owners when they kick in, you should choose the 30 year fixed rate loan if you can afford to do so. (Your mortgage rate can go from 3.5% to 5.5% over night!)

Conventional ARMs are also subject to risk based pricing adjustments. So, all of the above mentioned variables can apply to these loans as well as 30 year fixed. 

Conventional financing can end up being very costly for those who do not qualify for the best rates, because when it comes to risk the banks always win. Buyers always pay for higher risk.

Other loan options

There are several other types of mortgage financing available. FHA, VA, USDA, private lenders, hard money, etc. Each type of financing comes with its own good, bad and ugly features, so each type of financing should be looked at and carefully considered when you are shopping for home financing.

FHA financing

FHA has historically been the option for those who are credit challenged. But, increasingly, those with lesser down payments are opting for FHA financing because the minimum down payment is only 3.5% of the purchase price, and, the fact that you have only 3.5% to put down does not affect your rate. BUT, FHA covers their risk by charging you both an upfront fee for the loan, plus monthly mortgage insurance to cover their risk for the life of the loan. Rather than the rate, the amount of the monthly mortgage insurance will be affected by how much risk you are to the lender. For example, if your credit score is lower (as low as 620), or if you have prior derogatory credit issues, you will be charged a higher monthly mortgage insurance premium. Some lenders do offer FHA financing to borrowers with credit scores lower than 620, but then rate as well as mortgage insurance will be higher. 

FHA rehab loans are a great option for those who want or need to purchase a lower priced home that requires renovations in order to make it safe and habitable. Make sure, if you are looking at fixers, that your lender is aware of this in advance, because there are defined steps you must take in order to close your purchase. Otherwise, FHA is very picky about the properties they finance and have very strict standards about the condition of the property if you are not getting a rehab loan.

Another downside to FHA financing is that the maximum purchase price is lower than the maximum price for conventional financing.

FHA does lend on manufactured homes, but does require a minimum 20% down payment, and these homes must be in excellent condition and must have been built after 1978. 

USDA loans

USDA loans cover up to 100% financing! But there are restrictions.

They are offered only in “rural” areas (as determined by population as of the last census.) In the Portland metro area, USDA loans are pretty hard to get, because only neighborhoods that are way out from downtown Portland still qualify. Additionally, there are income limits for home buyers, maximums on purchase price, and minimum credit scores are higher than for FHA financing.

But, if you are looking in a USDA eligible neighborhood, be sure to talk to your lender about whether or not this option will work for you. Anyone who qualifies gets the best conventional 30 year fixed rates with zero down payment and minimal mortgage insurance premiums.

VA loans

VA loans have been around forever, and what a great program they are for veterans. In most cases, there is zero down payment required, and vets will get the best rates with lower credit scores as well. They do have to pay mortgage insurance, but it is minimal as compared to the MI charged on FHA or conventional loans.

Thank you veterans for your service! You definitely deserve the best mortgages possible for the sacrifices you have made for the rest of us.

Hard money and private lender financing

As a general rule, only those who cannot qualify for any of the above types of financing will turn to hard money or private financing. The exception is when you want to purchase a property that does not qualify for any of the more well known forms of financing. If you seriously want to purchase a home and cannot get a loan, be prepared to pay much higher rates and more points for your loan. These private lenders know you have no other options, and are in a position to take advantage of that fact. Also, these lenders almost never lend without your having considerable “skin in the game” in order to protect their investments in you.

It’s important to talk openly with your realtor and lender when buying a home

Because a mortgage is the biggest debt most people will ever take on, and buying a home is the biggest and one of the most eventful purchases of your lifetime, home buyers need to talk openly with both realtors and lenders to help us guide you to the best purchase and financing for your unique circumstances.

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Get ready for soaring housing prices and rents in Portland 2016

Just a few hours ago, for the first time ever, the Portland Metro Council voted NO to expanding the UGB (Urban Growth Boundary) for the Portland metro area. The boundary has been expanded each time the Metro council has met since it was first established 40 years ago.

high density housingMetro counselors interviewed stated that they believe there is already enough room within the urban growth boundary to accommodate forecast growth, assuming that local governments adhere to the general plan and build an additional 123,000 housing units by 2035. The plan is that 80% of that 123,000 new units will be multi-family housing in downtown Portland, within major designated urban centers and along transportation corridors. Only 20% (24,600 units) of the new housing will be single family housing according to the master plan.

Critics are already saying that they feel this decision could lead to housing prices  soaring even more than had been forecast prior to this announcement. It is also likely to lead to higher rents in the area, though Portland already has a shortage of rental units now.  According to the most recent growth  forecasts for the next 20 years:

  • The population in the Portland metro area will increase by 400,000 people to 2.7 million;
  • The population of the city of Portland will increase by 260,000 people;
  • There will be an additional 140,000 jobs created in the city of Portland alone.

The Portland City Council will be meeting next week to try to determine how to accomplish the goals set forth in the updated Comprehensive Plan without sacrificing “livability” in the city of Portland.

Since 2012, the Portland metro area has experienced what has often been called a “home buying frenzy.” This year alone we have seen housing prices rise 10%. And according to RMLS, housing inventory dropped again in  October to only a 1.8 month supply.

The fallacy here is that the majority of home buyers prefer high density multi-family dwellings. As I have previously reported, the majority of buyers are looking for detached single family dwellings and don’t even want to look at attached dwellings, never mind condo developments. Yes, there is demand for condos and town homes, especially in the downtown areas; but this is not the preference of 80% of the population.

Neighborhoods throughout Portland are already protesting the high rate at which some of our beautiful older homes are being demolished to make way for 2-3 homes on the same property. Recently residents of Eastmoreland paid a developer $800,000 to save the land with a house he had purchased to demolish. The protest centered around his plans (which had been approved) to cut down 3 giant sequoia trees to make room for 2 houses where only one had stood among the majestic trees.

Will other neighborhoods have to fork out more money to buy back homes from developers? Just imagine how our area will change if another 30,000 houses are torn down to make room for multi-family dwellings.

But will our housing prices soar next year based on this news and the updated Comprehensive Plan for the Portland metro area? Historically, when demand exceeds supply, prices rise due to competition. Can our home buyers get any more competitive than we have seen over the last few years? Time will tell, but the forecast for 2016 is continuing low inventory and increasing home prices.

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The number 1 misconception about home financing

Typical down payments for home buyers 2015During and after the great housing crash of 2007-2008, home financing became almost impossible. Even the most qualified buyers had a  hard time getting a mortgage. At that point, in order to purchase a house, most buyers needed at least 20% down to qualify.

Unfortunately, the idea that 20% down payment is still required to purchase a house has persisted and is keeping many who would like to purchase a home on the sidelines scrambling to save that cash.

As you can see from the graphic, very few buyers actually put 20% down in 2015.  In fact, the average down payment for first time home buyer was only 4%, and even repeat buyers put down only 13%. Most buyers, even those with cash, opted to use that money to pay off debt and establish a rainy day fund.

It’s true that lending regulations remain much tougher than prior to the crash. A good credit history is still important, and with the exception of veterans and rural property buyers, 100% financing is just about impossible to find. However, financing is available with credit scores as low as 620, and as little as 3.5% down for just about anyone. Self employed buyers can sometimes even obtain a mortgage with only one year of tax returns.

Banks are flush with cash these days, and one of their favorite investments is housing. With money readily available for qualified buyers, you might check with your favorite lender, or call me for a referral to discuss the assorted lending options that are available to you.

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The wealth gap widens between home owners and renters

Increasing gap in wealth renters vs home ownersAs you can see from the graphic prepared by the NAR (National Association of Realtors), based on a survey completed by the Federal Reserve, home owners have always had a significantly higher net worth (between 31% – 46% ) than renters. This gap has been widening since the start of the economic recovery in 2010, while renters have actually seen their net worth decrease.

Of course, most of this is due to the equity that has been accumulating in their homes. This spread is forecast to continue to widen over the next few years as rents continue to rise, while home owner payments remain relatively stable. The forecast for 2016 is that home prices and values will continue to rise which will add more to home owners’ net worth and wealth.

At the same time, increasing rents will eat away more and more at individual’s wealth.

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Housing forecast for winter 2015 through 2016 in Portland metro area

real estate sold sign for newsletter2015 has seen just about the hottest housing market in Portland’s history. Sales were up about 25% over 2014, and it seems there is no shortage of buyers in sight as we wind out the year. We did see a bit of a slowdown in September, but this is typical as families get into back to school mode. Year-to-date, we have seen metro wide price increases of almost 10% for 2015 (higher in some areas).

October housing activity has picked back up again and this trend is expected to continue throughout the winter months and into 2016. Inventory has been at 1.9 months for a few months now, and isn’t budging as buyer demand is still outpacing the number of new listings hitting the market. According to Zillow, “The median value in the region is $295,600, and the median sale price is north of $300,000.” Many buyers have already been priced out of the market, and for those waiting for prices to drop, don’t hold your breaths. That scenario is not forecast for the upcoming year at all.

In fact, most economist believe that while price appreciation should slow when inventory finally catches up to demand, we are unlikely to see any “housing crash” any time in the near future. Due to much more stringent lending standards, forecasts are for a stable housing market at least through 2022!

duplex - Portland ORInvestment property prices rising as much as single family housing

We are seeing the same pricing increases in multi-family properties as we are seeing in single family homes. In fact, there are some statistics that point to even greater increases in multi-family pricing because of the recent huge increases in rents here in the Portland metro area. Multiple offers are common as competition heats up to grab a share of the rising rental income.

For buyers of multi-unit properties, location is every bit as important as for home buyers. Buyers should be watching for properties in areas with easy access to mass transit, though should expect to pay a premium for properties in the best locations. Renters always expect to pay higher rent in good areas than in marginal areas, so you will recoup your investment even when you pay more for the property.

It’s important for investors to be realistic about prices for multi-unit properties. If the average house price is $300,000 for a given area, you shouldn’t expect to purchase a duplex (basically 2 houses) for at or close to the same price. In fact some investors are rehabbing multi-unit properties and selling each unit individually for great profits.

 

 

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Tips to save money on home renovations for property flippers

Thinking about getting into property flipping? Have you received an invitation to a free seminar about flipping? or have you watched any of the long list of TV shows on flipping? They all make it seem so easy and profitable.

fixer homeWho can resist the temptation to try to “Flip properties without using a cent of your own money?” The truth is that there are private money “lenders” willing to put up the money for you. These lenders are better known in the trade as “hard money,” and there’s a reason for that. They are expensive. With most of these lenders, before you ever see a dime of profit, you will generally have to pay 3-6 points (3%-6% of the amount you borrow) PLUS ½ the profits.

In most of the country distressed properties typically sell for as little as 50% below actual value. But in the Pacific Northwest, distressed properties are usually priced at only 8%-10% below actual value, unless they are major fixers. This makes just finding a suitable flip very difficult. Bank owned properties are often considered the best prospects because they are lower priced; but banks are notoriously hard to deal with and don’t budge much on their prices.

Your best option for actually making a profit on your flip is to find a house that looks terrible. The price will be low relative to the neighborhood values and the profits can be huge because the majority of home buyers prefer “move in ready” homes and are willing to pay for that convenience.

How to increase profits on flipping homes

  1. If you can pay cash or finance the house yourself, even at investor rates, you are way ahead of the game. You’ll save on closing costs and keep all the profit.
  2. If you have any cash to put into the purchase or renovations, this is money you won’t have to split with a lender when you sell. Even if it’s just $10,000, that’s $5,000 in savings to you.
  3. Demolition – can you do some of this yourself? Why pay contractor’s hourly cost for demo you can do yourself or have done by a handyman who is less expensive than a contractor?
  4. SHOP SHOP SHOP -Go ahead and get a bid for all the work from a contractor. Then see how much you can save if you take on some of the work yourself. Remember that your contractor will charge his/her hourly rate for ALL the work completed, even if he subbed out the job for half his rate.

    1. Sub out some of the work yourself. Roofers for example are all over the board in their estimates, so get a few bids on your own.
    2. Put in pre-engineered hardwood floors rather than more expensive hardwoods at about half the cost and have Lumber Liquidators install the floor (again at a lower cost than your contractor). You’ll find pre-engineered hardwoods in many new homes, and they are beautiful and durable too.
    3. Shop specials at big box stores. They are running sales all the time on just about everything from flooring to appliances so be sure to watch for these sales and save money on your rehab project.
    4. Buy “assemble yourself cabinets” (Cabinets to Go is a great vendor with really beautiful cabinetry.)
    5. Granite counter tops? Shop around to see if any vendors have “end pieces” left over from another job. These are often sold at very reduced prices. The trend lately is for mix and match counter tops and cabinets anyway these days.
    6. Can you re-use some of the materials already in the house? For example, damaged granite in the kitchen might have enough salvageable to use in the bathroom.
    7. Install energy saving features (such as tankless hot water). Buyers are becoming accustomed to paying extra for eco-friendly homes and it is a great selling feature.)
    8. Don’t spend a lot of money on plumbing or lighting fixtures or any item that is inexpensive to replace and is subject to personal taste. Buyers won’t walk away from a house because they don’t like the faucets you choose.
    9. Can you do some of the finish work? Such as painting ?
    10. Ask your realtor what features are most popular with buyers and what extras you might be contemplating that will result in very low return to you.

It’s important to note that some projects require building permits and licensed professionals to perform the work. Hire a professional to do electrical or plumbing work or other work that requires a permit and final inspection.

If you can afford to purchase in a very popular neighborhood where home prices are much higher than the cost of the house you’re looking at, you can expect to reap more profit than in less trendy areas. Always think worst house on the block for the highest profit.

In the Portland metro area, the biggest profits are often on old craftsman or Victorian houses. Buyers love these homes, but will rarely take on a renovation project themselves. Be careful here though. Look for homes with period features and stay true to the period when renovating. In fact, many old home flippers will keep the original kitchen cabinets and fir flooring and just refinish them.

Always keep your eye on the prevailing price range for the area. Remember, you are buying this property to re-sell as quickly as possible. You don’t have to put in every feature that you would want in your own house. But make sure whatever you do makes the house attractive to buyers.

Flippers, unlike banks, must disclose whatever they uncover during the renovation. While this can be a scary thought, you might also think of it as your best protection from a future lawsuit especially if you take care of the issue professionally and correctly.

And finally – don’t expect huge profits on your first flip. Any cash you make is cash you didn’t have before you started your project. And remember, we are still enjoying a very hot housing market. If you’re going to get into the game, do it while the market is hot. You just might see more profit than you expected.

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September Portland housing market – still hot and favoring sellers

Another offer not accepted

Is this how you feel after you hear you’ve had another offer rejected?

The Portland housing market closed out August much like the rest of 2015. As of the end of August, we still had less than 2 months inventory in listings, which is not good news for home buyers. Some are speculating that the situation could get even tougher during the winter months when typically fewer home owners will list their properties for sale.

While we did see inventory rise from 1.6 months to 1.9 months between July and August this year, these numbers still scream “sellers’ market” throughout the Portland metro area. We also saw a bit of a drop in demand during August, as compared to July 2015, but an increase of just about 20 percent of homes sold during August 2015 as compared to August 2014.

According to an article on Oregonlive.com, “The average sale price through August of this year was $353,200, a 6.2 percent increase over the same period of time in 2014. The median sale price rose 7 percent, from $285,000 to $305,000.”

Typically fall signals a slowdown in the housing market. This usually means that buyers who are really serious have less competition for the homes out there. But there is such pent up demand this year that we just don’t know what the fall and winter seasons will bring this year. And, for those who prefer to wait until after the holidays, if 2016 is anything like 2015 this year, home buyers were out in force as early as New Years’ Day in 2015.

The forecast for 2016 in Portland is more of the same; huge home buyer demand and low housing inventory at least through the spring months, which of course will cause a continued rise in both home prices and values. Sellers are still receiving multiple offers on their homes, even fixers, often within hours of a listing going live.

And if you think the Portland housing market is an anomaly, you should know that Portland didn’t even make the most recent list of 25 hottest housing areas nationwide.

I know this sounds a bit like gloom and doom for home buyers, but for those who are serious and persistent, are available to view houses as they are listed, and make offers very quickly, their efforts will be rewarded.

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Milwaukie OR prices climb 18% from last year

Milwaukie OR on the mapHas Milwaukie OR become one of the hottest cities in the Portland metro area? It appears that so many buyers have been priced out of NE and SE Portland that home buyers are looking elsewhere to spend their dollars. Milwaukie has long been an outlyer in the recent Portland metro area housing boom since 2012, but the new Orange line of the Max, scheduled to open on September 12th has brought a lot of attention to the area.

The city of Milwaukie has spent a lot of money improving and updating the downtown area. The waterfront park has undergone a major update and the Farmers market is one of the largest and most diverse in the metro area too. But perhaps the driving factor in the popularity of Milwaukie over the last year has been the opening of the Orange MAX line, scheduled for September 12th.

While home prices have soared in nearby areas, home buyers have been looking just a bit south of Sellwood, Eastmoreland. The end result is that home buyers have finally discovered Milwaukie and are snapping up properties as quickly as they are listed. Home values have soared 18% in just the last year, while housing inventory has dropped to only about 50% of what was available just a year ago. It looks like that trend is likely to continue, especially for homes within walking distance of the new MAX station located just a short distance south of downtown Milwaukie. Residents of Milwaukie had fought the new MAX line fearing that it would cause property values to drop and crime to increase. But in fact, just the opposite has happened so far. Even big investors from outside the metro area are now swooping into Milwaukie buying up large parcels of land for future development.

The grand opening of the new MAX line is scheduled for September 12th with lots of events scheduled that day at all Orange line stations on the way to downtown Portland.

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Pre-approvals for mortgages – What you need to know

In a busy housing market, most people know that before you even go out to look at houses, you need to get a written pre-approval for financing. While you may have checked your credit scores recently, your scores don’t tell the whole story about your credit history. The truth is that since the recent recession and the consequent tightening of lending standards, there are many people out there with credit scores between 650-750 who do not qualify for a home loan. A prior bankruptcy, foreclosure or short sale could have your dream of home ownership on hold until the mandated waiting period. And those with old collections and even old judgments will have to pay those old debts prior to obtaining a pre-approval too.

In a sellers’ market, it is not uncommon for sellers to receive multiple offers on their homes. When this happens, sellers may opt to basically ignore offers that are not accompanied by a pre-approval (or proof of funds for cash buyers).Of course sellers are looking for the most money they can make on their homes, but their decisions are also based on the likelihood that an offer will actually close. For sellers, nothing says serious buyer more clearly than a signed pre-approval from a lender (on lender letterhead).

Your pre-approval process is usually fairly easy and with most lenders pretty fast too. You will need to provide (at a minimum) the following information to your lender:

  •  2 months most recent pay stubs
  •  2 months bank statements – all pages included (If pulled online, statement must show your name on the on the paperwork.)
  •  last 2 years tax returns – all pages and all schedules
  • most recent 2 years W2s or 1099s if self employed

Your lender will pull a tri-merge credit report (all 3 credit bureaus) to determine the amount and type(s) of financing that are available to you. Most lenders will use the mid-score from the 3 bureaus.

Not only do sellers require pre-approvals; your realtor needs this information as well.

  • We want to show you properties that you are qualified to purchase.
  • We need to know if, for example you are looking for FHA financing, that the property is FHA approved (many condos are not FHA approved, so why look at them?)
  • Once you find a house you want, we need to be able to present as strong an offer as possible.
  • We frequently communicate with your lender, usually even prior to finding you a home, so we need that contact information as soon as possible.

Your pre-approval is usually good for 90-120 days. Once you have an accepted offer your lender will require all  new updated documentation, AND your credit will be re-pulled at that time too so please read on.

Managing your credit after you receive a pre-approval

Once you have your pre-approval from a lender, it is important that you manage your use of credit wisely. Most lenders should tell you:

  • DO NOT apply for any additional credit cards after your pre-approval is issued.
  • DO NOT make any large purchases ($100 or more) on existing credit cards.
  • DO NOT change jobs or give notice to your current employer. In fact, don’t use online services to search for a new job. Lenders are wise to all the online services, and often check social media sites to see what you’re up to that the loan application does not cover, and they do this just before the loan is scheduled to close.
  • Make sure that you pay all creditors on time.
  • Don’t file for a divorce or formal separation prior to closing a loan. Even if your spouse or partner will not appear on your application or loan, the legal ramifications of a divorce will affect your ability to finance a purchase.

Applying for new credit, large purchases on existing cards, and missed payments to creditors WILL lower your credit scores and will reduce the mortgage amount you qualify for.

You really should be using the time prior to home shopping to do any mortgage shopping before getting a pre-approval. Once you have an accepted offer with a seller, the Oregon contract does clearly spell out that you must notify the seller if you’ve changed lenders after mutual acceptance of your offer.

The credit bureaus allow up to 3 mortgage inquiries within a 90 day period without a 6 point drop in your scores for each inquiry. New sources of credit will lower your scores considerably more than 6 points.

If you know that you will need a new refrigerator for you new home, you have to put these purchases on hold until after your loan closes. You really can manage 1 or 2 days without a new refrigerator or washer/dryer or that big flat screen TV you now have the perfect wall for.

Virtually all lenders will pull a credit update and will verify your employment just before your loan is scheduled to close. Any negative changes to your credit scores, increases in your credit balances, or iffy news about your employment can kill your loan at the last minute.

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Factors that can increase the value of your home

street trees in a neighborhood

street trees in a neighborhoodReal estate agents know that valuing a home isn’t rocket science, but determining value is not nearly as cut and dried as the algorithms used by well-known property search sites in their estimated values.

According to House Logic, there are many factors that can influence the price buyers will be willing to pay for your home.

**Millenials cite “walkability” as the number 1 factor that influences their decision about location. In Portland, we are seeing more and more neighborhoods creating small shopping districts that home owners can walk to for groceries, coffee shops, fine dining, and boutique and retail shopping. Homes in walkable areas will see value increases of $4,000 – $34,000, depending on the type of shops and restaurants nearby. Clearly little boutique shops and dining are favored, and result in the higher valuations of neighborhoods. But just being able to walk to a local park is important too.

**Highly rated schools

**County or state parks or golf courses nearby can increase the value of a home more than you might imagine.

  • A public park within walking distance can increase the value 8-20%
  • A natural area can increase the value on average about $10,000
  • A nearby golf course can raise the value approximately $8,000.

**Here’s a surprise – House Logic says a nearby Walmart that stays open 24/7 could increase your home’s value 1-2% and if very nearby another 1%. In Portland, Walmart stores are not all that popular but are gaining traction. But watch for areas where a New Seasons or Trader Joe’s market is either proposed or ready to open. Those are sure signs that the neighborhood is either prospering or is definitely on the rise in desirability and values.

**Additional dwelling spaces (whether a separate building or a basement with a separate entrance) can increase your home’s value 24-34%. These separate units are in high demand but are relatively rare in the Portland metro area.

**Trees are a valuable asset – and trees in your own yard, or better yet, street trees throughout a neighborhood make the whole neighborhood appear lush and inviting and raise the values for all home owners in your neighborhood. According to a University of Washington research survey:

    • Mature trees in a yard add 2%
    • Mature trees on the street add at least 3% for all home owners on the street
    • Trees in the front yard add 3-5%
    • Mature trees in high-income neighborhoods add 10-15%

While all the above factors can influence the value of your home, you can’t move your home to a better location to attract buyers. Still, if you want to add value, something as relatively easy and inexpensive as planting a tree or two in your mowing strip can definitely enhance not only your house, but the looks of your entire neighborhood too. Imagine if everyone on your street planted just one tree today how much more inviting your street would look in just 5 years.

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Have you checked your credit recently?

Credit reportI’m sure it’s not a surprise to anyone that ID theft is alive and thriving these days.Did you know that approximately 1 of every 4 people in the U.S. has at least one error or derogatory item on their credit reports? And yet, with all the threats out there, most people are pretty lax about keeping tabs on their credit information. Just last week I personally received an updated report and found, much to my surprise, that someone else is using my social security number!

  1. Do you know if there is information on your credit report that is not yours? Or that was reported in error?
  2. Do you have a relative with a similar name? Or is someone else also using your social security number and causing information to reported on your report that isn’t yours?
  3. Do you have an old collection that was filed against you that you never cleared or that you thought you had cleared but was never reported as paid?

Everyone should monitor their credit on a continual basis. There are several credit monitoring services that you can purchase for as little as $10 a month, AND there are multiple free sources for obtaining your credit information as well. All three credit bureaus offer you one free report annually, and several businesses allow you to pull your credit at least several times a year at no charge.

As surprising as this may sound to many of you, the first time that many people learn there are errors on their credit reports is when they apply for a mortgage. Oops! Here you are, all all ready to go out house hunting and find a $5.00 collection on your report. No big deal, or so you think, but that $5.00 collection for cable TV service you were sure you had canceled on a prior move, can cost you a 100 points or more on your credit score. and can cost you thousands of dollars on your mortgage because of the higher rate you will have to pay, if in fact you qualify.

Fixing errors isn’t hopeless, but it takes time and could be more work than you might think. And if the $5.00 collection was a valid charge, paying it will help your score, but not nearly as much or as quickly as your score dropped due to the non-payment of a legitimate bill.

Be sure to check all credit that is being reported to make sure that it is yours. Look for names that your credit report shows using your social security number. Check to make sure the credit bureaus are showing your current address.

How to fix errors on your credit report – This article will outline the fastest, easiest way to fix errors on your credit report yourself, but be warned, it can still take 30 days or more to have errors removed. The reward is an immediate increase in your credit score, and a clean credit report. Errors that have been disputed and removed can never appear on your reports again. 

In March this year, “Eric T. Schneiderman, the New York State attorney general, announced that his office had reached a sweeping settlement with the agencies, affecting consumers nationwide, which was prompted by an investigation that began in 2012.” This is a huge victory for consumers because it will not only make correcting errors on your report easier to fix, but it will change how some information is weighted in computing your scores. The credit reporting agencies have announced that the changes will be implemented over the next 3 years, so don’t expect over night progress. But rather than outsourcing all disputes to employees overseas, the agencies have agreed to hire specially trained personnel to handle all disputes to make sure that they are handled correctly and promptly. AND best of all, information from collectors will no longer be given more weight than documentation from consumers.

While we’re waiting for these sweeping changes to take effect, please, if you haven’t done so recently – Check your credit report today. Don’t wait until you need credit to find out there are errors that can be fixed. The more frequently you monitor your report, the faster you will discover errors, and the easier those errors are to fix.

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Portland home sales and values continue to soar in June 2015

Portland OR closed home sales hru 6-2015According to RMLS, the median sales price for homes sold in June rose to $320,000; 2.2% higher than the median price in May 2015.

The continual rise in values is being fueled almost entirely by an almost record low inventory of homes for sale. As of the end of June, there was only a 1.6 month supply of homes listed. This means that at the current rate of consumption, all homes currently on the market will be gone in 1.6 months. This is the lowest inventory level since the peak of the mid 2000s housing boom. (A healthy market has closer to a 6 month supply of homes for sale at any given time.)

Currently a home listed becomes a “closed sale within 45 days! By comparison, last year at this time, it took closer to 60 days for a new listing to close.

On the upside, this year has seen a 5% increase in the number of homes listed, which can be taken as a vote of confidence that demand is very high, so this hot market is likely to continue for a while yet.

Lane County sees record home sales for June 2015

As Portland metro area housing is soaring, more and more buyers are finding themselves being priced out of our market. Never fear, there are other great places to live in Oregon, as home buyers are moving out of the metro area in search of “more bang for their buck.”

According to realtors in Lane County, the market is on fire. Most have never experienced the buyer frenzy that has moved south creating the hottest market Lane County has ever seen since RMLS started keeping records in Lane County in 2001. Like Portland, inventory is down while the median home price has risen dramatically from $210,000 in May 2015 to $229,000 last month.

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Mortgage rates creeping up

10 year bond yields

10 year bond yields

According to CNBC this morning, the yield on the 10 year Treasury bond moved up dramatically this morning causing some concern that mortgage rates (closely tied to the yield on the 10 year bond) are following. Best mortgage rates quoted this morning are between 4% – 4.53%.**

Last week, we saw the yield on the bond about 10 basis points lower than this morning, and of course, this could be a concern for our very robust housing market here in the Portland metro area.

Why did the 10 year bond yield rise so much this morning? This was mostly driven by international news:

  • The Greek bail out
  • Chinese markets on the rise
  • Iranian nuclear deal looks like it might be a go this time

All of these international crises that have been heavily weighing on US stock markets, look like they might be averted finally. Could this be the combination of events that will lead the Feds (led by Federal Reserve Chairman Janet Yellen) to raise over-night bank rates in their September meeting? This would most certainly be a signal that mortgage rates will move up in tandem.

According to the chart above, we are very near the high yield for the 12 months.

** Best 30 year rates on conventional financing are for those with 740 credit scores and 20% down payments. Rates are similar for FHA financing but also include PMI.

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Freddie Mac ranks Portland as the most improving housing market in 2015

Freddie Mac says there are 5 metropolitan areas, including Portland, that are out-pacing the rest of the country this year.

Those at the top include:

1. Portland, OR

2. Riverside, CA

3. San Jose, CA

4. Nashville, TN

5. Baton Rouge, LA

Freddie Mac ranks Portland as most improving market nationwide in 2015Yes, you read that right. Portland metro housing market is the leading improving metro area in the country right now. Freddie bases its statistics on what it calls the MiMi (Multi indicator market index). According to Freddie, the MiMi hit a high of 121.7 in April 2007, while it hit its low of only 57.4 in October 2010. Since then the housing market has rebounded approximately 31% and nationwide currently stands at 75.4%. That is still considered a weak housing market by Freddie Mac standards, but Portland now sits at 80.5% which is considered the low end of what Portland’s range should be. Still, we are a hot market, so that standing should continue to improve as we move into the summer months, typically the “busiest season” housing season of the year.

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Projections show Portland metro summer housing market will continue to be hot and competitive

Sold - Sale pending signAccording to Elliot Njus | The Oregonian/OregonLive , the Portland housing market is “fierce” and has been “the most competitive since the housing market began its recovery in 2012, with cash offers, above asking-price bids and rapid-fire negotiations marking desirable properties. New numbers from the Regional Multiple Listing Service this week suggest that won’t let up as the year’s busiest buying season begins.”

RMLS show that there were 2,734 homes sold in April 2015, and 2691 in May. While new houses are being listed all the time, at this pace, we will be out of houses to sell by the end of the summer because new housing is definitely lagging behind demand.

We know that over the last few years there have been approximately 30,000 new residents settling in the Portland metro area every year. It is forecast that this number will increase as we continue to see weather extremes across the country. From my own personal experience, we are seeing a major influx of residents relocating from California. This is being driven by their very high home prices as well as the extreme drought causing a lack of water, even for residential use. Other realtors I have talked with recently are also seeing far more residents relocating here from the east coast after the last two years of extreme winters.

A six month supply of inventory is generally considered a healthy market, while Portland numbers are less than 3 months at this time, and have dropped as low as 1.8 months earlier this year.

So “fierce” market competition is likely to continue throughout the summer and into the fall months as buyers rush to lock in purchases before the Feds raise rates and price many would-be buyers out of the market. As it is, mortgage rates are creeping up. Last year many home owners were able to lock in refinance rates as low as 3.5%, but most lenders are now quoting 4%* and even higher as rates continue to creep up anticipating the Fed announcement.

Another factor driving the market competition is the huge number of cash buyers we are seeing this year. Where the cash is coming from is irrelevant. What is unusual is that cash buyers are not seeing the advantage they had seen in the past where they could offer less and their offers were accepted because they could pay cash.

For sellers, weighing various offers can be complicated. Cash offers foster deal making with less chance of running into a snag, but sometimes the offers are lower. Meanwhile, high bidders — whether paying cash or using a mortgage — sometimes get cold feet and pile on additional demands.

And then, there’s the matter of whether the seller can find a place to move once their house belongs to somebody else.

The market is definitely very complicated for both buyers and sellers right now. But we seem to be seeing prices hitting a plateau finally. Hopefully this will continue as the summer progresses.

*rates for best qualified buyers

Click here to read more about how to qualify for the best mortgage rates

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Is the Portland housing market showing signs of slowing a bit?

real estate sold sign for newsletterIt’s no news to any buyers out there in the Portland housing market that homes on the east side have been selling in a matter of a few days. This includes houses as far south as Milwaukie, and as far east as Oregon City.

Housing inventory in March dropped to 1.9 month’s supply; far below a healthy level of 3+ months. While there are a steady stream of new listings, these are usually selling in just a matter of days. What’s even more disturbing is the number of “as is” listings that we are seeing. Fortunately for buyers looking for homes on the west-side, the market is quite a bit more normal.

Buyers are being driven primarily by low mortgage rates, but in fact, we are also seeing more cash buyers than at any time in prior years. There is no way to track just where the cash is coming from; it could be from parents, relatives, pooling funds from multiple buyers, and/or out of area buyers who are moving to Portland at the rate of approximately 30,000+ people every year. But it’s also springtime; traditionally the busiest home buying season of the year.

Most buyers, even those with cash, are seeing competition so fierce, it’s actually been scary. Some buyers have reported making as many as 20 offers on homes before they got one accepted. In the hottest areas, primarily just east of I-5, many homes have been selling at 10%-20% above list price and more. And this is affecting homes priced as high as $500,000 – $600,000! This is not because houses are deliberately been priced low, thought that does happen; but because we honestly don’t know where to price houses anymore. Comparable pricing of houses that sold 6 months ago are almost meaningless in a market that is moving so fast.

The sad part is that many would be home owners are being priced out of the market.

Suddenly in the last week or two, we have seen the market slow down a bit. Most sellers haven’t been receiving 10-20 offers, but more around 5-6. Unfortunately it’s way too early to say the trend is towards a slow-down. It could just be that a lot of buyers took a break. We did just recently have spring break week, where many would be buyers left town, so that could account for the slow-down. We’ll just have to watch and see.

On the up-side, Labor Day is just around the corner when the housing market almost always slows down from Labor Day through the end of the year. In fact, historically, those are the best months to buy, if only we didn’t have the threat of rising interest rates hanging over us.

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How to fix errors on your credit report

Did you know that 1 in every 4 credit reports contains errors and surprises? ID theft may be responsible, but more often what shows up on your report might just be an error that can be fairly easily corrected.

Some of the most common errors found are:

  1. A parent or child’s mortgage or other credit obligation is reported on your report as yours (even if your names are not exactly the same).
  2. A paid off debt is reported as still owing.
  3. A collection has been filed against you for a debt that was never yours.
    1. One of the most common forms of ID theft is using a fake ID to get cell phone service.
    2. If you have a fairly common name, someone else’s debt can be reported against you.
  4. TV cable or satellite service is often left on after someone moves out of a house or apartment. Until the service is actually shut off, the service provider will report the delinquency under the most current resident’s name.
  5. Blatant ID theft with multiple creditors is actually easier to solve, but if the amounts are small, you may not know about them until your credit is pulled.
  6. A debt discharged through a bankruptcy could still show as unpaid.
  7. Collection agencies are often irresponsible about reporting paid collections, and court systems are equally negligent about reporting paid in full judgments.

All too often errors will sit on your credit report for years without your knowledge. You can still get most credit with an error on your report, but when you apply for a home loan, these little dings on your report and score will raise their ugly heads in a huge way.

Did you know that most collections are auto-filed by creditors and can be for less than a dollar? Many people would think “who cares?” But that little collection can cost you up to 100 points or more on your credit score. That can make a huge difference in the home loan you qualify for and the rate you will pay, if in fact you qualify for a mortgage at all!

How to fight errors on your credit report

1. Contact the creditor

This sounds like it shouldn’t be too difficult, but in fact, most creditors, like cell phone providers or cable companies are pretty non-responsive to your efforts. Be sure to try to contact the creditor in writing so you have proof of your effort.

2. If you receive no response from direct efforts, file a dispute with one or more credit bureaus directly:

Experian,

Transunion,

Equifax

This is important because not all three bureaus will have identical information. They do share, but aside from mortgage lenders, most creditors report to just one of the three bureaus. The easiest way to file the dispute is online. You can even upload copies of your proof of error and/or attempts to resolve the error.

The credit bureaus will contact the creditor on your behalf. The creditors then have very limited to respond to the inquiry or within 30 days the disputed item will be removed from your report.

Usually you will receive a response within days of submitting a dispute acknowledging that your case is being investigated. If you do not hear from the credit bureau within 30 days, follow up. After your report has been corrected, you should receive, along with a letter from the credit bureau, an updated copy of your corrected credit report with your new score within 30 days of the date you file your dispute.

 

 

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