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.

How Interest Rates Affect the Bottom Line!

Did you know that a ½% change in interest is approximately equal to a 5% change in sales price? It’s powerful to realize the importance of the relationship of interest rates to your monthly payments.  This is the reason why our present low interest rates are so important!!  When I started my real estate professional life, interest rates were at 13% and when they dropped below 10%, we thought we’d just won the lottery!!!  So, our historic low interest rates coupled with the present market reality of decreased pricing is a serious reason to consider real estate as an investment!!!

An Eerie Lull in the Housing Market….but, Why Do Some Houses Get Multiple Offers and Others None?

August always brings an “end of summer” lull in the Portland real estate market and perhaps we’re just a bit paranoid these days, but it seemed to me our vacation slow-down started earlier in August than usual.  I feel less interest circling my listings despite recent RMLS stats that show a slight increase in lockbox activity.

Which brings me to the thoughts on why some listings sell and some don’t!  Several elements are paramount:

1) Location, of course! Location has always had impact and continues to do so.  But, you can’t do anything about your current location (short of moving your house).  So, you must work with what you can change.

2) Pricing is Paramount!  You have to be “ahead” of the market is pricing (and, yes, you must compete with short-sales and foreclosures…no one said life was going to be fair)!  If you are “chasing the market down” you will end up losing money as the listing gets “tired” and “stale”.  If you really want to sell, price it like you really want to sell!

3) Exposure!  Over 90% of all real estate searches start online.  Where is yours?  Are the photos impressive and alluring?  If your listing shows well on the internet, it will entice viewers to go from “virtual showings” to “in-person showings”

4) Staging and Condition!  Unless you are attempting to sell for less than is owed on the property, attractive staging and good conditions must exist.  If you are selling short, you don’t want to put any more time, effort or money into the property but, otherwise, you must have everything in order.  Smells must be eliminated, pets contained, paint re-touched or re-done, workwork spruced, carpet and wood floors evaluated….remember the competition is stiff out there and you have to be on your “A-Game”!!

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

What is Agency and What Does it Mean to a Buyer or Seller?

AGENCY! How exactly does “agency” apply to real estate and the relationships between buyer and seller and their real estate agent in our Portland Oregon real estate market?  What are the responsibilities and obligations?  AND, what are the subtleties that influence everyday behavior of agents and their clients.  I actually practiced the profession of real estate for years (1985 till 1996) prior to having a reasonable and rational “legally defined” relationship with my buyers.  Prior to 1996, all agents had a fiduciary responsibility to the seller.  Which, of course, was always a bit silly for agents who had clients who were buyers, who often never met or had contact with the seller (other than a possible presentation of an offer to a seller….much more common in the pre-technology days) and who were truly advising their buyers on the next home or investment!  The “old way” of thinking was that the seller paid the commission, thus all agents in the transaction were representing the seller.  Thankfully, reason prevailed and the Oregon Real Estate Agency enacted the Buyer and Seller Agency agreements and everyone agreed that the commission structure was built into the pricing of homes! 

Skip forward to present day, where buyer representation and seller representation is SOMEWHAT of an assumption.  However, I think some people are still confused.  When I list a home, I am responsible to the seller.  I prefer the new and next buyer come represented by their own agent.  That way there is NO conflict of interest.  I’m not saying I haven’t handled both sides of transactions in my 24 years of servicing real estate transactions, but those are special circumstances and that’s another blog altogether (having to do with integrity and believing in “win-win”).  Agency simply means my job is to represent your property in the marketing efforts and ensuing negotiations.  My first step is to initiate whatever means I can employ to get “product awareness” to the general public.  That means I’m first communicating with other agents, utilizing the #1 advantage Realtors have, which is the power of the real estate community!!  I employ the power of our Portland RMLS (Realtor’s Multiple Listing System) where all working Realtors are immediately notified of properties that come on market with detailed information, photographs and video tours.  Because over 90% of all buyers begin their new home or investment property searches on the web, your property deserves the very best online exposure possible. 

But, here’s where clarification is important.  As a listing agent I’m, personally, “famous” or “infamous” in quickly reacting to potential buyer inquiries.  I never even ask if someone has a real estate agent representing them.  If they want to see MY listing, I want to show them!  It’s in my best interest and the best interest of my seller for me to show my listings.  I know THAT particular listing better than most!  Do I care if they have their own representation…absolutely NOT!  That is in the best interest of the buyer, which means ultimately, its in the best interest of my seller.  So, therein lies the confusion.  When a seller calls and asks, “how many times have YOU shown the listing” it’s a meaningless question.  If you’re talking to me, I’ve shown it as many times as I had an opportunity!!!  But, that’s not representative of how many inquiries I may have had.  An agent will often get multiple e-mails and phone calls from both agents AND the general public, looking for any specific information they can’t garner from their web experience.  At higher price points, you don’t generally have buyers wandering “willy-nilly” through open houses or calling a ga-zillion agents for information.  Those buyers will hire a specific agent, utilize that agent’s expertise and contacts and have that agent organize a targeted and efficient tour of homes that fall within their chosen price point and other search parameters.  They don’t waste their time looking at overpriced listings or those that don’t present well on the web.  At lower price points, there are more buyers available who, perhaps, have not yet identified an agent of choice and will be more likely to call the listing agent to gather information or schedule a showing.  But, understanding exactly what you are hiring your agent to do is paramount to a successful relationship. 

If you are selling your home, you are hiring an agent to market your property!  This includes exposure to the other agents as well as enticement to agents AND potential buyers through descriptive narrative, professional photographs and multiple web displays.   You are also hiring their expertise on pricing and staging your home to sell.  Listen to them! Remember:  “pricing, pricing, pricing is the new location, location, location”.  Once an offer is procured, your agent is your conduit for negotiations and a resource for various possible repair help and referrals. 

If you are buying a home, you are hiring an agent to provide service through arranging tours and professional advice through their understanding of the local real estate market.  Very few people get “sold” a house.  It’s much too big a decision for someone to “sell you”.  A good buyer’s agent helps you sift through the pros and cons and make an educated decision.  Your agent is a great sounding board and support through brainstorming.  Once you’re ready to make an offer your agent is your negotiator, mentor and source for various referrals to lenders and property inspectors.  Remember:  “buy the least you can buy and still be happy”.

Is Pricing a Home to Sale an Art OR a Science?

I’m afraid it’s both and, therein, lies the conundrum!! 

Some Realtors are scientists.  They run the numbers.  They do the math.  They analyze and hope to find the truth.

You can’t ignore the numbers, they don’t lie…..or do they?  The numbers don’t lie but the real estate business deals with humans and they are the “wild card”.  When you deal with humans (and the largest purchase the average human will make is their real estate purchase) you are dealing with emotion!!  Particularly in a residential transaction!

Other Realtors are artists.  They connect and intuit.  These agents are using their gut, acknowledging the experiences they gain everyday by being with other buyers.  This should definitely provide some answers….but will it provide all the answers? 

Are you confused? Well, don’t worry as you are not alone.  We, as professionals working in our chosen field of real estate, are confused in our present marketplace.  I do believe the savvy Realtor has to run the numbers, but in this market, the numbers WILL often lie.  So, you have to add what your gut tells you and what your intuition sells you.  It’s often a “hard sell” to a disappointed seller who doesn’t understand why his property just won’t garner what was hoped.  But, nothing is more disappointing than overpricing your listing and not selling.  You end up “chasing the market down” instead of leveraging what little control a seller might have in this market by pricing correctly.  It ends up a bitter disillusionment for all involved.  It’s not a perfect science or a perfect art, but it does take a lot of cooperation, listening and, most of all, TRUST!