Ted C. Jones Brings Strong Opinions/Humor to Portland Oregon Economic Forecast!

Ted C. Jones, Chief Economist for Stewart Title

•   ”and, I think it’s gonna be alright,
• yes, the worst is over now.
• The morning sun is shining like a red rubber ball”. 

The Cyrkle/1966  http://www.youtube.com/watch?v=hOxLaHPPzzw

  Ted C. Jones, Ph.D.
Senior Vice President-Chief Economist, Stewart Title Guaranty Company
Director of Investor Relations, Stewart Information Services Corporation NYSE-STC  gave a robust presentation today, Thursday February 25th, 2010 at the Columbia Yacht Club to a room full of Real Estate Brokers, Mortgage Brokers and Title reps hungry for information and tidbits of foresight on economic predictions for Portland, Oregon.  There were no “defining moments” or “jarring revelations” at this seminar, but lots of good facts, figures, opinions and observations!  His real estate and economic predictions (which he reminded us were just about “spot on” last year, except concerning interest rates) simply concurred with a lot of other reading and presentations I have attended.  However, he made the material interesting, palatable and interspersed what he called “Ted’s Solutions” to a myriad of problems.  You don’t have to agree with everything but he certainly backed up his opinions and prophecies with a lot of graphs and historical data.   

• Wall Street:  liquidity and Washington realizing that they can’t contol
• Jobs:  he feels the stimulus is not working
• Time-Bomb loans:  now concerned about commercial
• Terrorists attacks
• Pandemic:  like Bird Flu
• Inflation and cap rates going up
• Tax-cuts
• Energy:  US imports 63% of oil
• All the band-aid fixes for real estate, autos, credit cards and banks

Just as a regular citizen trying to reign in a budget and make their finances work, the US must start with decreased spending.  He definitely believes (as do most in the industry) that interest rates are artificially low and will definitely begin to creep up.  He believes we will not see interest rates as low as we are now experiencing in our lifetime again (I guess it matters how old you are).  Those buyers with good credit or cash, a bit of patience and some luck will make some great buys in the existing market.  And, he feels our next crisis will be in the commercial real estate market.  “History doesn’t repeat itself, but it certainly does rhyme!”….Mark Twain.

House Hunters Still Busy with the Holidays!!

Lockbox Activity Dips Again

Potential House Hunters Still Busy With Holidays

When comparing the week of December 14-20 with the week prior, the number of times an RMLS subscriber (could be a Realtor or appraiser) opened a lockbox decreased 2% in Washington state and 7.2% in Oregon.
  

Washington

Oregon 

“It’s Hard out There for a Mortgage Broker”!

It’s a difficult time in the money-lending business and Portland Mortgage Brokers are not escaping!  Man, I would not want to be in the business of trying to get loans approved right now.  As if the real estate market needed MORE challenges, getting $$$ has become much more difficult.  It started with condos and new regulations and has filtered throughout the lending world and impacts all property types.  FHA paperwork has become amazingly more redundant and conventional financing demanding higher credit scores and/or more money down.  As a buyer and self-employed small business owner, it has always been a trying process for me.  So, I feel your pain.  It almost becomes a full-time job getting all the reports, paperwork, verifications, letters of explanation and notes from your dead great-great-grandmother.  It’s a wonder we don’t all lose our existing employment while trying to comply with the almost daily requests for additional information.  Well, “it is what it is” for awhile I suspect.  This is the pendulum swinging way too far the other way to compensate for years of “loosey-goosey” lending practices.  I would definitely rely on your Real Estate Broker or the referral of a trusted friend or family member to connect with a reliable Mortgage Broker.  Otherwise, a little patience, understanding and resiliency will help get us through the process.  I often compare the loan and escrow process to childbirth, the memory fades and we have that second child (or get that next loan).  It’s all good!

Portland Metro Monthly Real Estate Stats…Come and Get ‘Em!

The very best to you and yours this holiday season. I hope you are enjoying the magic that also comes at this time of year. We officially start the beginning of winter next week, but that means the days will start lengthening again. I think the Portland real estate market is also reaching the end of a long dark period, and I look forward to a new and brighter year for 2010. The tax incentive for home buyers has been expanded to include certain current or repeat homeowners, so if I can be of service, please contact me at 503-709-0802 or jj@janeesejackson.com.

FAQ’s on Repeat Tax Credit:  http://bit.ly/RepeatBuyerTaxCredit

FAQ’s on 1st Time Buyer Credit:  http://bit.ly/Original1stTimeBuyerCredit

Sales activity in the Portland area increased in November compared to the same month in 2008.  Closed sales were up an amazing 72.4% and pending sales rose 7%. New listings dropped 7%. Year to date pending sales were up 2.6% although closed sales were behind last year’s total by 4.1% (my guess is the number of short-sales that fail to close). Y-T-D listings decreased 19.9%.

The monthly inventory rose just slightly to 7.1 months from the previous month (which is typical for the holiday season), which means it would take approximately 7.1 months to sell the 12,697 active listings. The average price for is down 12.9% and the median sale price declined 11.1% compared to the previous 12 months in the Portland area Metro market.

 As always, information is very neighborhood specific, so contact me for info about your area!

Track your ‘hood or find your new home or investment on this site by signing up for daily listings!  You are enjoying www.fabulousportland.com

Season’s Greetings!!

“Are We There Yet”??? Predictions for Housing and the Economy for Portland and Oregon!

“I’ve Been Down So Long, It Looks Like Up to Me”**!!!  Today the Oregon State Economist, Tom Potiowsky presented his “State of the Oregon Economy” predictions and updates for 2010!  I read a lot of financial blogs and feeds so I wanted to see if Mr Potiowsky’s predictions corroborated other analysts.  The answer is “yes”!  The era is being called the “Great Recession” (note: not “Great Depression”) due to this being the longest economic downturn since 1930!  According to economists, this recession actually began in December 2007 and has now been deemed “technically ended” for the US in summer 2009 and for Oregon in the fall of 2009!  Mr. P emphasized time and time again in his discussion today that the “technical” ending is quite different than the “feel good” ending.  This “feel good” ending to our downturn will be very personal and much slower to realize.  He predicts that by the 2nd half of 2010 and/or the first half of 2011 we will begin to “feel better”.  And, the key to recovery is continued repair and loosening of the credit markets!

This has been a global recession.  For the US, imports and exports slowed considerably and our CPI (consumer price index) has decreased in ‘09 for the first time since 1955!  Consumers, businesses and governments have restrained spending.  Now there are inflation>deflation>inflation worries.  But, Mr. P did not believe that inflation was a big worry for 2010 and 2011.  Fiscal stimulus and lower energy prices have helped to spark the recovery and there’s still a lot of stimulus money to spend.  Labor has to get higher wages to pay for inflationary prices.

Despite the fact that this morning there were positive numbers for unemployment (10%, down form 10.2%), Mr. P feels that the unemployment rate is a lagging indicator of economic condition.  He expects that there could be more job losses in early 2010.  We should, he believes, pay more attention to job creation!  How many jobs are actually being created?  In the 2001 recession, it took four years for jobs to completely recover.  It may take 5-6 years to get back to our former job rate this time around.

The US dollar recovered briefly but has dropped again.  Mr. P feels that the value of the dollar is a relative value against other currencies….that’s all!  The dollar value is going down to where it used to be and where he believes it should be, at a more natural level.

What happens after we spend all the stimulus money?  What’s behind the stimulus to continue the recovery?  Labor markets may remain weak because businesses will be conservative and reluctant to re-hire until they’re sure this recovery “has legs”.  He compares our recovery to the constellation “Cassiopeia” (the shape of a soft “W”) and there could be a recovery with a slight dip.  In Oregon we hit 12% unemployment in March of ‘09 and down to 11.3% in October ‘09.  For some perspective, we were at 5% in April of ‘07!!  Some of our jobs are gone for good, others are simply in hibernation.  And, keep in mind that unemployment figures do not include those that have quit looking or those that have taken part-time work until they find full-time employment.

Mr. P believes we are at or very close to the bottom and predicts a slow housing recovery with a possible 35% increase in housing starts by between 2013 and 2015.  Metro predicts that our population will grow by one million people in the next 10 years.  The Housing Price Index “Rate of Decline” slowed and California is starting to gain ground.

Leading indicators for Oregon show that the economy has turned, but it will be a slow growth!  We will see more signs of this recovery in the 2nd half of 2010 and in 2011.  Mr. P predicts some positive job growth for Oregon in the 2nd half of 2010 but it could be 2011 before we really start to show positive numbers.  Commercial real estate will remain weak till 2012 with a mild recovery that is absolutely dependent on the credit markets.  Private investor groups will continue to buy up property since credit markets are tight.

Risks to this forecast:

• Credit Markets: There must be credit availability to the credit worthy.
• H1N1 Virus:  He does not see this as a risk as big as the media plays it.
• Export Markets:  Must stay viable.
• Geopolitical:  Some unseen geographical/political event.

**Referencing the book by Richard Forina

Why Real Estate is NOT a Sales Job!

I am often engaged in conversations about real estate.  Mostly I find myself discussing market conditions, the pricing of homes and neighborhood trends as these aspects of my job affect the state and health of the economy as a whole.  Portland Oregon real estate buyers and sellers are like every other market in the world in that they love speculating, discussing and comparing.  I always love to talk about real estate because I’m fascinated by the business (and all business-related matters).  When asked “how do I like sales?”, I have to answer that my job is not “sales”.  I would love to sell houses (and would be honored to have actual “sales skills”), but I guess I have a fundamental belief that you can’t “sell” a house to someone.  Real Estate is much too large a purchase, too fraught with emotion and even for the investor, too tied to “the bottom line” to simply “sell”.  Webster defines “sell” as “to exchange goods and/or services for money”.  A Real Estate Broker helps people exchange money for goods by providing service.  This service includes meeting that buyer’s sense of urgency, providing consultation, brainstorming, evaluating, offering information and occasionally being the inspiration or “muse” for such an investment.  This job is sometimes “situation management” and often during escrow it is temporarily “crisis management” or for the individuals involved, it is “stress management”.  The fact that I continually see and evaluate homes in an incredible variety of market conditions (the good, the bad and the ugly) and have done so for 25 years should be of consequence to someone who occasionally buys and/or sells.  But, I can’t convince them to buy a house if the right components aren’t there (nor would I want to).  I have influence, information, opinion, financial common-sense, a darn reliable “nose for real estate” but my job is a consulting, not sales!

“GUILT” as a Business Model?

I’ve recently had some business-to-business experiences that make me go “hmmmmmm”???!!!  How does “guilt” work as a business model?  I’ve had some interesting interactions where I was enlisting services to repair items and where I was utilizing services I use daily.  In both instances (and I’m sure I could retrieve many more examples) I either pay monthly for these services or had recently made a large purchase from this business and was asking for a non-purchase-related repair (for which I was willing to pay, of course).  In both cases, the people were extremely nice and accommodating but with that with that “oh-so-subtle” guilt that was reminiscent of some “Saturday Night Live” character that I can’t recall, who always said:  “no…no, don’t worry about me”!  Are you following my drift?  Is anything other than gratitude appropriate in our very trying economy?  I think it is so important as business owners, service providers (and humans on the planet) to be appreciative of the business and services we receive.  Obviously, abusive or insulting customers and clients are not tolerated but requests and job-related activities are what you are hired to provide.  Rolling of the eyes is out of line, but an extreme example.  Subtle exasperation and reiterations of how busy, redundant, unappreciated, obligated you might feel are counter-productive to a successful business owner/service provider-to-client relationship.  I’m writing this as a reminder to me to be delighted and appreciative that someone actually remembers my name and calls for advice, services, confirmations or even to respectively “unload”.  Portland Oregon real estate is struggling alongside many other businesses right now and I understand stress levels are high.  We are all in this together!!

The Section 8 Dilemma for Landlords!

If you check in on occasion with my web logs and rants, you may have followed the articles written in August of this last summer about a North Portland Oregon duplex purchase and renovation started in August and completed in September.  Go to http://fabulousportland.com/2009/08/10/soi-took-my-own-adviceit-is-a-good-time-to-buy/ or scroll down on the right hand side of the page to the “Archives”>August to read all of the entries.  Anyway, by mid-September we were ready to rent!  I posted online and put out signage and flyers in front of the North Vancouver address, knowing that the popularity of the North Mississippi neighborhood and North Williams corridor would entice potential renters!!  Almost immediately the phone began to ring.  Many of the callers inquired as to whether we would accept “Section 8″ renters.  Section 8 is a division of the Housing Authority of Portland or HAP.  Their mission is dedicated to providing safe, decent and affordable housing for individuals and families who are challenged by income, disability or special needs.  I didn’t know much about Section 8, but was certainly not adverse to learning more.  I met with two young single mothers and was much impressed with their vitality, ambition and personality.  They explained the program and indicated their excitement that I was definitely willing to work with them and HAP!  We started the vetting process only to hit roadblock after roadblock.  Everyone at HAP was very helpful, but their hands are tied by what I perceive to be an antiquated system of establishing rents.  Our duplexes were 3 bedrooms, 1.5 baths and 1200 SF and I had established the going rate for the area to be a certain price point.  In an attempt to be competitive, I go online and compare other properties offered for rent and try to price my rentals a bit below other comparable properties.  So, I really felt I was asking market rent, considering the updated condition and location, or even a bit below market!  HAP’s system includes a process of assigning “points” for certain amenities such as garbage disposal, air conditioning, dishwasher and more but absolutely NO consideration for condition.  This encourages a lack of respect for living conditions and pride in one’s home.  These two young single mothers wanted to provide not just little extras (as a matter of fact neither even cared we didn’t have a garbage disposal) but wanted a pretty and safe and enjoyable home for their families to live.  They loved that the units had been lovingly restored and updated.  I was sorely disappointed, as I too, had raised two children as a single mother and knew what struggles these two vivacious women faced.  I wanted to help but HAP could simply not see fit to pay market rent.  There was an article in the Oregonian regarding HAP attempting to educate landlords about being open to Section 8 tenants.  I believe they must first readjust and update their thinking about how to value rents! By the way, I did quickly re-rent both units for my asking price!!

Higher Interest Rates to Come?

 Over the last 7 business days, the Bond Market (where Mortgage-Backed Securties are sold) has taken a significant drop.  Not quite as big as the drop that followed Memorial Day Weekend, but it seems to be heading in that direction.  As Mortgage-Backed securities (MBS)decline in pricing, rates tend to go up.  Around Memorial Day, the Federal government slowed down its purchases of MBS, which earlier in the year was artificially propping up the pricing and helping rates.  Plus, there started to be an over-supply of new debt being sold.  In simple terms, all these stimulus programs bring debt for the country.  That debt is sold on the Bond Market.  When there is more to sell that there are buyers, the basic supply-and-demand rules take effect.  Too much debt to sell equals lower price which means higher interest rates!  This may continue as the economy is showing signs of recovery.  Today’s jobless rates came in better than expected and some sectors are showing profit gains.  So, it’s a mixed bag of news, as our economy recovers we may experience the pain of higher interest rates for homes.

Slight Increase in Pending Home Sales Index

The “Pending Home Sales Index”, a forward-looking indicator based on nationswide contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.  To understand how this home sales index is calculated go to: http://www.realtor.org/research/research/phsdata

But, is this an indication of a recovery in the Portland home selling marketplace?  Homes ARE selling if they are priced to suggest a “steal or a deal” because homes that are NOT distressed must compete against homes that ARE distressed properties (meaning that sellers must simply sell for less than is currently owed on the property OR the property is bank-owned and has already been foreclosed).  But, if you subscribe to the theory that all sales are good sales because it continues to lessen the inventory then this is a positive indicator (or, at least, not bad news). 

Here are the 2009 Portland Oregon monthly stats for lockbox activity (monitors the number of home showings by Realtors in the Portland area) showing a definite spike in May and slight decrease in June (schools out and family vacations???)

Monthly Stats for lockbox activity for Oregon

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