IF You Are Thinking of Buying Portland Real Estate…Why Buying Now Will Save You $$$!!!

Portland Oregon Real Estate Update!  Homeownership doesn’t always make sense and so you need evaluate if the time is right for making that new purchase, moving up or moving down or procuring an investment property.  However, as my Father used to say there’s never a “perfect time” to “buy a home”, “get married” or “have children”, but if you’ve decided it’s something you desire you just need to make it happen (with the proper due diligence, of course)!  Here are some factors that could and should impact your decision!!  Most everyone is probably aware by now of the first-time buyer tax credit (go to http://bit.ly/Original1stTimeBuyerCredit  for more information).  And, you’ve probably heard about the repeat or existing homebuyer tax credit (go to http://bit.ly/RepeatBuyerTaxCredit for more details).  Both of these incentives end April 30th, 2010.  But, there are other factors in play behind the scenes right now.  The Federal Reserve Bank of New York has been the buying up “mortgage-Backed-Securities” (MBS) on the Bond Market since November 2008 (and have been the single largest buyer).  This is where interest rates are determined.  Investors buy MBS securities as investments.  The larger the demand, the lower interest rates need to be.  If demand falls, then interest rates will need to rise to make the MBS more attractive to investors.  Part of the stimulus bill included the Federal Reserve’s purchase of over $1trillion in MBS and this has kept rates very low.  This program was scheduled to end December 31st, 2009 but has been extended through March 31st, 2010!  Many experts predict that interest rates will begin to rise then.

So, are you following me so far?  We have the impending end of the tax credit, the possibility of interest rates rising, lots of existing inventory and low pricing.  Most of the tricky, sticky, weird and wild loans are gone but other mortgage issues could have a negative impact on buyers relying on FHA (Federal Housing Authority) insured loans.  The FHA upfront mortgage insurance (MI) premium is going from 1.75% to 2.25% of the base loan amount on April 1st, 2010.  For example, on a $275,000 purchase price with an FHA loan, the down payment would be $9,625 with a base loan amount of $265,375:

Before April: Upfront MI FHA =$4,644 (1.75%), Tax Credit=$8000

After April:  upfront MI FHA=$5,971 (2.25%), Tax Credit=0

Many people rely on FHA secured financing because they are more forgiving on credit scores and homeowners can have a higher loan-to-value ratio (less money required for a downpayment). 

Forbes.com recently has an article on the Top Ten cities where it was a good time to make the jump to homeownership because of increasing rents (and Portland Oregon made the list) (go to http://www.forbes.com/2010/01/21/buying-versus-renting-lifestyle-real-estate-homes.html  and http://www.forbes.com/2010/01/21/buying-versus-renting-lifestyle-real-estate-homes_slide_11.html to read more).  And, if you’d like to explore a good rent-vs-buy calculator go to http://www.gonorthwestloans.com/mortgageLoanCalc.html

If you have decided that a new home is in your future, let’s make it happen!!!

Commentary on my New DROID Phone! Take Note Portland!!

Ok, so I have suffered long and hard as I enjoyed both of my two children buying, loving and employing the IPhone with all of it’s technological wonders.  However, when in my downtown condo, they both would have to gravitate to the windows to get coverage (AT&T). I’m sorry, but receiving and returning phone calls, texts, e-mails is an absolute “must” in by real estate business!  At this juncture in the development of communications and technology, I cannot give up my Verizon coverage.  So, my “not-so-closet-tech-geek-son” tells me there is no other choice for me other than the DROID.  I buy it on a Tuesday evening at the downtown Portland Oregon Verizon store, with the promise that despite the fact they apparently don’t have the tech support I was accustomed to with my Blackberry, I would have some support in how to set up the necessary technology to enjoy my DROID.  Not so.  Luckily, I spawned a techno-geek first-born son who was able to save the day.  He utilized “Go To My PC” and virtually helped me complete the transition. However, now that I’ve done the dance, I realize it’s not that complicated but you do have to have the will to survive.  I’m a PC and windows aficionado.  So, give me a set of instructions and I can usually comply.  There was no “how-to” booklet included in the purchase.  I can usually follow directions, but the on-line instructions were not A-B-C.  Okay, enough whining.  Once you realize that all you have to do is set up a g-mail account (and give up Outlook???) (which, BTW, my son reminds me is the “wave of the future”, soon there will be nothing but web-based communication), you also realize this is not that complicated.  In my business, any time spent without my e-mail, text, contacts, etc is time-a-wasting. I’m still not completely weaned off Outlook, but I’m trying to get comfortable with my g-mail account.  I do love the “threads” (once I figured out the “method to the apparent madness”) that only a google account can provide.  I’ve not figured out how to set up e-mail distribution groups on g-mail and the search functions are not as organic (or maybe I’m just not used to them yet).

Now that I can call, receive and send e-mail, get my texts and import my contacts and calendar (from Outlook), I’m a happy camper.  What else do I love?  I can actually download RMLS (the Portland Realtor’s Multiple Listing info) on the DROID and read it!  I can surf the web with much more proficiency, I have multiple apps (much like the IPhone), I have an individual icon for texts, e-mails, voice-mails, more.  I love that you have the choice of the touch-screen PLUS the qwerty keyboard (it makes the transition smoother between the Blackberry and the Droid).  I love the high resolution screen.  I love the 5GB camera.  I love the voice activation feature.  I love the GPS.  It’s so new, I’ll admit I don’t know all the advantages.  As I know more, I’ll share!  Anyway, it’s a Brave New World out there….love it or leave it!??

What’s the Buzz…Tell me what’s a-happening (in Portland Oregon real estate)!!??

“What’s the buzz…tell me what’s-a-happening….what’s the buzz…tell me what’s-a-happening”.  I certainly don’t have a crystal ball, but sure could use one these days!  Perhaps on Craig’s List??? I’m doing a lot of market analyses of Portland properties lately to determine an appropriate possible sales price.  It’s not easy in a market where foreclosures and short sales undercut and undermine the market stats (and expect more of those this year).  It’s often difficult to define that “sweet spot” in the market where you don’t leave money on the table but still entice buyers to offer!  There ARE buyers and there ARE properties selling IF they appear to be a “steal or a deal”.  It is still very much a buyer’s market with the possible exception of well-placed, well-staged and well-priced homes at the first-time buyer price point.  At that entry price point (which is looking oh so much more attractive and accessible than it was a couple of years ago), I have run into some multiple offer situations.  Other higher price points do also move but with much more consideration and due diligence.  The move-up/repeat buyer market moves more slowly and it’s all about price!  The more money at stake, the more enticing the price must be.  With inventory as high as it is, you must consider pricing your home to sell as a competitive sport!  You must out-shine and under-cut the available competition. 

Are the first-time home buyer tax credit and repeat home buyer tax credits helping our real estate marketplace?  I definitely believe that the credits are an incentive.  But, no one should buy a house merely for a tax credit.  However, if a new home was a goal I would most certainly be amenable to “free money” from the government!  I guess if I were thinking I was ready to make a move, I would be hustling to get my house on the market while that stimulus is still available (buyers must be in contract by April 30th and the transaction closed by June 30th).  I do believe that it’s a good time to buy real estate (and put my $$$ where my mouth is by purchasing a duplex this summer).  Interest rates are very low and there is the potential that rates will rise this year.  I’ve also sold one of my real estate investments this year, so “I feel your pain” regarding how much you may have once thought your property was worth  :-).  Real estate is still a good addition to any well-rounded portfolio and has always stood the test of time (with “time” being the operative word here).  For some stats on how low interest rates affect housing costs, go to http://fabulousportland.com/2009/04/07/to-buy-or-not-to-buy/ and for a great rent-vs-buy calculator, go to http://www.gonorthwestloans.com/mortgageLoanCalc.html .  Investment real estate is a wonderland of positives in my book.  Someone else pays the mortgage, you get multiple write-offs and depreciation on your taxes, you work towards a positive cash-flow with increasing rents over time and you enjoy appreciation of the value of the property (albeit slow in our current environment). 

So, that brings me to appreciation and what can we expect for our recovery?  See paragraph one as I’m definitely in the market for a crystal ball!  I do read a lot about this subject and attend presentations, I’m “in the trenches” everyday and have worked through multiple real estate market conditions since 1985 (remember interest rates at 13%???).  There are ups and there are downs.  Also, remember if you are buying and selling in the same market you are feeling the pain of selling, but enjoying the benefits of buying.  I do see two unknowns in our immediate future:  unemployment and the commercial real estate market and how they will continue to affect our residential supply and demand.  Otherwise, I believe it will be a slow climb.  It could be five years (give or take) before we see a full recovery.  And, what does “full recovery” mean?  I think our minds will be reluctant to embrace another real estate frenzy anytime soon.  So, a slow and steady plod is a more reasonable expectation.  I’m cautiously optimistic about real estate in 2010!  We are likely to see a slight rebound in sales this year as stabilizing home prices and record-high affordability conditions (along with continued low interest rates) draw buyers into the market.  It’s not as sexy or exciting, but I’d always rather be the turtle than the hare anyway.

In Appreciation of One of the Many Portland Wonders!

I was thinking I would go cross-country skiing this weekend, but the warm mountain conditions made me re-think.  We had this welcome respite from the rain and the sun peeked out on a warm-ish Saturday in Portland, Oregon and I headed to Forest Park.  It’s actually so amazing that we have this landmark park right in our city limits (well, some of it is in the Portland city limits while the rest resides in unincorporated Multnomah County).  But, we can enjoy over 5,000 acres of beautiful, lush forest with 70 miles of recreational trails (including the Wildwood Trail that I hiked today).  It is one of the country’s largest urban forest reserves!!There are 112 bird species and over 62 mammal species alongside 2nd growth trees and some old growth.  Today some of the trails had a “need for speed” and others had a “need for cleats” (as the mud was deep and mucky).  I’m always fascinated by the hikers, runners, mountain bikers, meandering families with baby strollers, dogs and kids.  It’s a fabulous local natural resource!   What a great day!!!                                                                 

1031 Tax-Deferred Property Exchange and Who Wouldn’t Want to Defer Taxes??!!

A 1031 Tax-deferred exchange is a real estate transaction involving the sale of one property with the tax on the capital gain deferred because ofthe qualified purchase of another like-kind property in exchange.  For 1031 exchange purposes, the term like-kind property is interpreted as any type of investment property, rather than property owned for personal use.  The 1031 exchange involves a purchase that must close within 180 days of the sale.  There is also a reverse 1031 exchange in which the sale occurs after the associated purchase.  Investors utilize the 1031 exchange to defer taxes by selling an investment property and using the profits to buy one or more new properties without immediate tax consequences.  Both real and personal property can be exchanged but they are not like-kind to one another.  Almost any property, whether real or personal, which is held for productive use in a trade or business or for investment, may qualify for a tax-deferred treatment under Section 1031.  You can exchange an investment property for any other qualified investment property.  In other words, you have a rental house which now has lots of equity accrued and you would like to sell and purchase two duplexes or sell a duplex and move-up to a small apartment building, etc.  As long as they are “like-kind”, it is allowable.  It’s a great way to continue utilizing both the equity in your investments and other people’s money to acquire wealth through real estate investments.  And, who doesn’t like the idea of deferring taxes?  The tax payer has 45 days from the sale of the original property to identify the new property and 180 days to close.  There are relatively strict rules on the procedures for a qualified tax-deferred exchange, so I use an experienced intermediary to make sure the process is seamless and my tax deferral is protected!  You do not have to use all the funds from the original sale in the exchange.  A tax payer/exchanger can choose to withhold funds or receive other property in an exchange, but it is considered “boot” and will be subject to federal and state taxes.  Anyone owning investment property with a market value greater than its adjusted basis should and could consider a 1031 exchange and I would definitely consult your accountant or CPA!  If you’d like a referral to tax-exchange specialist to further discuss options, please contact me. 

I have noticed that investment properties are “holding their own” in the Portland, Oregon real estate market.  Investors with good credit and/or cash are attempting to locate good rental properties.  Being a landlord is not for everyone but the rewards can be great.  If you think about it, you have someone else paying the mortgage, hopefully a bit of cash flow (and the promise of more over time), plus some appreciation (albeit slow in this market) and the opportunity to set up passive income for the future.  Real estate is also a very tangible investment, as you can drive by…touch and see it.  I love that!!! 

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