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!!! 

Getting a Loan in a Challenged Lending Market!

Okay….getting a mortgage is definitely not the “loosey-goosey” program it used to be.  You want a home or investment property and are afraid of the looming and blooming credit crunch?  Be not afraid!

• Mortgages are pretty straight-forward.  Not many options, so choices are simpler.  You have 30-year fixed, 15-year fixed, a few ARMs (adjustable rate mortgages) and occasionally another option.  But, the exotic loans of a few years ago are a thing of the past, so less confusion!
• Interest Rates are still VERY Low!  How long will they last?  I certainly don’t know.
• The new Good Faith Estimate guidelines (mostly) protect consumers.  But, the fact is they will protect the consumer from sleasy loan officers.  All fees are disclosed upfront and that amount must stay the same or you will be given up to 7 days to think about it!
• Tax Credit has been extended and EXPANDED!  The tax credit for first time home buyers has been extended till April 30th and the repeat home buyer tax credit has implemented.  See: http://bit.ly/ExpandedBuyerTaxCredit

Change is hard, but the new direction will be good news to the mortgage industry and the consumer!  Appraisers are under a lot of scrutiny, underwriting is a nightmare and if you get a loan you feel like you just got “vetted” for public office!  But, all this new direction in the mortgage and housing industry will ultimately make for a saner housing market…..someday!!!!!

How Bankruptcy Affects Mortgage Loans!

Credit guidelines for mortgage loans are quite fluid these days and continue to change with time.  This information is based on current rules!  The Portland, Oregon housing market has not been hit as hard as some areas of the country but our unemployment remains high.  I see lots of commercial space sitting empty.  Of course, that suggests that “bankruptcy happens” (among other things).

CHAPTER 7 BANKRUPTCY:

FHA FINANCING

HUD requires that a minimum of two years from the date of discharge has passed AND good credit has been re-established.  To get the best interest rate, lenders require a minimum qualifying FICO score of 660 or higher.

CONVENTIONAL FINANCING

The wait period is four years from the discharge date.  To get the best interest rate, you need a minimum qualifying FICO score of 720.

Both loan programs allow an exception to the wait period for cases with extenuating circumstances.  For example,  if the bankruptcy was the result of a job loss, medical bills due to no insurance, disability, etc.  If you qualify for the exception, the wait is one year for FHA and two years for Conventional.

Different rules apply for Chapter 13 AND for consumers who have more than one bankruptcy within seven years.

CHAPTER 13 BANKRUPTCY:

FHA FINANCING

The filing of the Chapter 13 bankruptcy must be approved by the court and the debtor must have been in repayment for at least 12 months.  The repayment history as established by the Chapter 13 must be satisfactory and a credit history must be re-established.  The new mortgage must be approved by the bankruptcy court.

CONVENTIONAL FINANCING

The filing of the Chapter 13 bankruptcy must be approved by the court and the debtor much have been in repayment for at least 24 months.  The payment history must be satisfactory and a credit history re-established.  The new mortgage must be approved by the bankruptcy court.

If the Chapter 13 filing is not approved by the courts (meaning it was dismissed), then the buyer would need to wait four years to obtain a convention loan or two years to obtain an FHA loan!

Profile of Home Buyers and Sellers!

NAR has recently released the 2009 Profile of Home Buyers and Sellers.  The report compiles the results of 9,138 surveys returned by buyers and sellers who sold or puchased a home between July 2008 and June 2009.  The surveys were sent to buyers and sellers based on deed transfers and other public records.  Here are some interesting highlights:

• 47% of all buyers were first time buyers.
• 62% of first time buyers reported that the primary reason for buying a home was the desire to be a homeowner, 35% of all buyers reported that as the number 1 reason.
• The median age of all buyers was 39, same as last year.
• The 2008 median income of buyers was $73,100. The median income of $61,600 among first-time buyers and $88,100 among repeat buyers.
• 83% of all first time buyers are under the age of 44.
• 62% of ALL buyers are under the age of 44.
• 63% of all buyers had not children under the age of 18 residing at home.
• 90% of all buyers used the Internet to search.
• 84% of buyers reported the photos to be the most useful information.
• The number one action taken after viewing a home online was to drive by or visit the home.
• 66% of buyers reported that they used a print ad to search, but between 84% to 90% (depending on the print medium) reported that those sources were “not useful”.
• 36% of buyers found the home they purchased through an agent, 36% found the home they purchased online, less than 3% found the home they purchased in a print ad.
• 78% of buyers purchase their home with an agent.
• 85% of sellers sold their home with an agent.
• 44% of buyers found their agent through a referral from a friend or family member.
• 40% of sellers found their agent through a referral from a friend or family member.
• 10% of buyers purchased a foreclosed property up from 3% in 2008.
• 39% of the mortgages were FHA loans.
• 87% of buyers viewed real estate as a good investment.
• 78% of home buyers purchased a detached single-family home.
• The median sales price of a home was $240,000 in the west.
• 78% of buyers considered commuting costs to be very or somewhat important in their decision.
• The typical home buyer searched for 12 weeks and saw 12 houses.

If you would like a copy of the entire report just let me know and I’d be happy to send you a link!  It’s a great reinforcement for what we have experienced locally in the Portland, Oregon real estate market!!  The internet and a dynamic web presence rules in real estate marketing.  Having as much information as quickly as possible is a definitely plus as more and more younger buyers enter the marketplace and older buyers realize the convenience of internet shopping.  As “smart-phones” continue to be more affordable and accessible, you will most likely see more utilization of instant web flyers sent to phones rather than paper flyers (makes good ecological sense as well).  It’s an exciting time in the world of real estate……stay tuned!!!

Goals for 2010! Procrastination is not your Friend!!

Hey! Welcome to a New Year AND a New Decade! It seems to insinuate a lot of pressure to make resolutions and accomplish new things.  If you live anywhere near the “here and now”, every day actually offers the promise of resolutions realized or not.  I’m always pondering my goals, I do write them down and I actually have to be careful how I frame them as I’m so naturally “hard-wired” for goal-setting and so “type-A” about keeping them!  I say this because life is a “flow” and resiliency and flexibility are paramount to success.  However, I digress!  Any time you set a goal, you have to be looking around the corner for “procrastination” to rear its ugly head!  And, I can promise you that “procrastination is not your friend”.  Not ever!  End of story!  If there’s something you want to do, something you want to accomplish………do not give “procrastination” a ride to anywhere. 

If you’re still considering your “New Year/New Decade” resolutions, I would think these are at least categories to include:

• Family.  It all starts with family.
• Health.  Without health, the rest of your list doesn’t matter.
• Friends.  They’re your “family” not by blood.
• Finances.  You may not care about money, but everytime I go to buy groceries, they make me pay with money???
• Personal Development.  This a core element of a fully realized human being, we just have to keep trying.
• Business Plan.  If you’re in business, you need one. If you’re not, you’re dependent on other businesses you frequent having one.
• Philanthropy.  Once you’ve reached the level of providing for yourself and your family, giving back is essential for fulfillment.
• Love.  YES!!!!!!!!!!!!!
• Education.  We just need to keep learning new things.
• Spirituality.  We need to feel like we leave this earth making a difference (size does not matter).
• Exit Plan.  When, where, how and why will we retire?  What is our legacy?

Lots to think about and some time to do it!  Just don’t let “procrastination” keep you from any one of these.  I promise you “that guy” ain’t your friend.  Just do it!  Happy New Year! 

Health, wealth, peace, love, joy…………..jj