August 2010 Inventory Levels - By Area

BUYERS REAL ESTATE MARKETS (Favoring buyers = too many houses for sale):


**Neutral Market = 6 - 7 months inventory **



N. Portland = 11.6 months of inventory

NE Portland = 8.4 months of inventory

SE Portland = 9.5 months of inventory

Gresham/Troutdale = 9.2 months of inventory

Milwaukie/Clackamas = 11.9 months of inventory

Oregon City/Canby = 14.1 months of inventory

Lake Oswego/West Linn = 14.06 months of inventory

W. Portland = 9.9 months of inventory

NW Washington County = 9 months of inventory

Beaverton/Aloha = 8.4 months of inventory

Tigard/Wilsonville = 10.1 months of inventory

Hillsboro/Forest Grove = 9.3 months of inventory

July 2010 Inventory Levels by Area

Balanced Real Estate Market (favoring both buyers and sellers & under 7 months of inventory):

• NE Portland 6.7 months of inventory

Buyers Market (favoring buyers and = too much inventory):

• N. Portland 10.7 months of inventory

• SE Portland 8.4 months of inventory

• Gresham/Troutdale 13.3 months of inventory

• Milwaukie/Clackamas 9.3 months of inventory

• Oregon City/Canby 14.7 months of inventory

• Lake Oswego/West Linn 10 months of inventory

• West Portland 12.5 months of inventory

• NW Washington County 9.5 months of inventory

• Beaverton/Aloha 10.6 months of inventory

• Tigard/Wilsonville/Sherwood 12.2 months of inventory

• Hillsboro/Forest Grove 10.4 months of inventory

May WA County Sales Stats

Single Family Residential

• 58% homes sold were 3 bedrooms with an average price of $241,505
• 42% closed in 30 days or less
• 17% closed in 121 days or more
• 50% buyers used conventional financing
• 30% buyers used FHA financing
• Closings down 1% from last month (561 vs 568)

April 2010 PDX Metro Sales Stats

• 53% homes sold were 3 bedroom with average price of $254,962
• 44% closed in 30 days or less
• 20% closed in 121 days or more
• 43% buyers used conventional financing
• 31% buyers used FHA financing
• Closings were up by 7% last month (1769 vs 1641)

Mortgage Rates Reach 2010 Low As Stocks Crash

Mortgage rates inched lower yesterday as global investors continued to flock to risk free U.S. Treasury debt securities. This has been a constant theme in the rates market recently. However, while benchmark Treasury yields have moved considerably lower in a short time, mortgage rates have failed to keep pace with the "flight to safety" rally.


A flight to safety happens when investors are nervous about owning risky assets like stocks, but do not want to miss out on earning a return on their funds, so they allocate money into risk-free U.S Treasury debt to provide a safe-haven AND an investment return. To remind readers, as benchmark Treasury yields fall, prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.

PDX Metro Real Estate Stats - February 2010

Portland Metro Real Estate Stats


February 2010

Single-Family Homes (Residential)


* 51% of homes sold were 3 bedroom- average price was $234,750

* 31% closed in 30 days or less

* 26% closed in 121 days or more

* 43% of buyers used conventional financing / 29% of buyers used FHA financing

* Closings were up from January a little more than 4% (929 v. 890)



Condominiums



* 20% sold were in the $200-249k range- average price $255,286

* 37% closed in 121 days or more

* 28% closed in 30 days or less

* 44% of buyers used conventional financing / 20% of buyers used FHA financing

* Closings were down from January by a little more than 12% (86 v. 109)



Stats were provided by RMLS, Home Sales Report, February 2010

Feb 2010 Sales Stats

• 51% homes sold were 3 bedroom - avg price $234,750
• 31% closed under 30 days
• 26% closed over 121 days
• 43% buyers used conventional financing
• 29% buyers used FHA financing
• Closings up over 4% from last month (929 vs 890)

PORTLAND METRO REAL ESTATE STATS - FEBRUARY 2010

Survey Results of 2009 Homebuyers & Sellers

• 47% of recent home buyers were first-time buyers
• Typical first-time home buyer was 30 years old while typical repeat buyer 48
• Typical home purchased was 1800 SF and built in 1991
• 78% home buyers purchased a detached single-family home
• Typical home buyer searched for 12 weeks and viewed 12 homes
• 77% of buyers used a Real Estate Agent
• 10% buyers purchased a home in foreclosure, up from 3% in 2008
• 92% buyers financed their recent home purchase
• 85% sellers used a Real Estate Agent to sell their home
• Recent sellers typically sold their homes for 95% of the listing price
• 60% sellers reported reducing their asking price at least once

FHA changes!

Just a heads up if you...if you didn't know...FHA has just announced...


they will begin charging 2.25% in up front mortgage insurance (from 1.75% last year and 1.50% the previous year) and

require 10% as a down payment for borrowers with poor credit scores.

This is to begin Spring 2010.

The details are still to be released.

2010

Who are the big losers going to be in 2010? Here are a few hints:


1. Smaller regional banks. According to Troubled Asset Relief Program (TARP) figures, small banks have been repaying TARP funds much more slowly than larger national banks. A total of 663 banks with $58.6 billion in outstanding loans that have not yet paid back the U.S. Treasury, and they do have five years to use the funds before they must get the bailout paid back. Many of them, however, probably never will pay back. One of these banks has already gone bankrupt and two others have failed. Others face government sanctions, and 56 missed their last quarterly dividend payments to investors.

2. Luxury Homeowners. Those with mortgages of $1 million or more are defaulting at twice the average U.S. rate, according to a Bloomberg report. The stock market decline and cuts in bonuses and pay have squeezed many high end owners who are also seeing their mortgages become seriously under water in many markets. As home prices continue to decline in markets such as New York-New Jersey and in many east and west coast markets, expect even more $1 million plus homes to become available for Short Sales.

3. Commercial and multi-family property owners. Look for Lenders to stop carrying along commercial properties in serious default. The Mortgage Bankers’ Association has reported delinquencies in this category to be up in the 3rd quarter and we fully expect that the 4th quarter results will continue this trend. This will be a tremendous opportunity for Short Sale flippers and buy and hold Investors to acquire reasonably priced properties.



Hiring Expectations for 2010

In order to safeguard against a double-dip recession (which many bearish economists predict) there needs to be some acceleration in hiring. Will it happen in 2010?

There’s a little good news on the job front predicted this year, according to CareerBuilder, one of the largest online job boards. Their forecast indicates 20% of employers will increase the number of permanent, full-time employees in 2010, which is a 14% improvement over 2009. Only 9% of CareerBuilder employers plan to shrink the permanent employee base in 2010, which is down 16% from 2009. The largest percentage, 61% expect no hiring changes during the year, and 10% of the survey respondents were unsure of their hiring trends for 2010. There were fewer changes expected in part time hiring, but more employers, 11%, expect to add part-timers than plan to lay off (8%).

The fields that look good to expand in 2010, according to CareerBuilder, are information technology, manufacturing, financial services, business and professional services. Technology and customer service were the two biggest fields slated for hiring. Expect to see many freelancers and independent contractors hired rather than permanent employees in many cases.



When Will Home Prices Hit Bottom?

Our crystal ball has predicted a continuing decline in home values in the majority of markets. When will we begin to see some improvement?

According to First American CoreLogic prices will decline through the winter and then, spurred by lower unemployment rates and lower housing re-sales inventory, the prices will begin to bounce off the bottom in March. First American CoreLogic expects 45 of the largest housing markets to decline 4.2%, much less drastic a prediction than that of Deutsche Bank, which we reported a week or two ago expected a decline of 10 to 12%. First American CoreLogic projects a 1% year-over-year appreciation by October 2010.

Which projection should you follow? It depends on the details for your specific market. We tend to skew more conservative when it comes to projected values. If the decline is less than you predict, you get a built-in bonus – if it’s more than you predict, you could end up upside down. Make sure that if a decline is expected in your market you figure those projections into your Short Sale offers. On average the Short Sale will take three or four months to complete, and may take longer.



New Home Sales Plunge; Expected to Rise in 2010

The November new home sales statistics were expected to be up, but instead declined by 11.3% in November (355,000 new homes). The decline may be due to a drying up of buyers under the original $8,000 home buyer’s tax credit program, or uncertainty about whether the program would be continued.

With the extension and expansion of the tax credit program economists expect to see a new surge in new home sales early in 2010. The expansion to include those looking for credits on move-up homes will give a good boost to the home construction industry for those projects that can be completed by mid-year. The NAR reports a 7.9 month supply of new homes currently on the market, or 235,000 for sale as of the end of November.

PDX November Metro Sales Stats

Single Family Homes

• 55% of homes were 3 bedrooms - avg price $249,614
• 42% closed in 30 days or less
• 20% closed in 121 days or more
• 44% buyers used conventional financing
• 34% used FHA financing
• closings down from last month (1781 vs 1605)

Washington County October Sold Stats

Single Family Residential

• 55% of homes were 3 bedrooms - avg price = $253,496
• 42% closed in 30 days or less
• 21% closed in 121 days or more
• 48% of buyers used conventional financing
• 34% of buyers used FHA financing
• Closings were down 1% from last month (520 vs 517)

Inflation is Investor's Best Friend

Actually, if you are investing in stocks and bonds, mutual funds, or just about anything else (except, perhaps, commodities), inflation can be a real killer. The title of this article was adapted from a recent article in Forbes entitled 'U.S. Dollar Has A Long Way To Fall', which posed the question: why does the Fed want inflation? It is very simple: If you carry a lot of debt, inflation is your friend.  If the Fed wants inflation (the not-implausible premise of that article), you can be assured that the Fed will make inflation, sooner or later. Next question: who carries a lot of debt? You guessed it, real estate investors. Through the magic of high leverage ratios and cheap fixed rate financing (particularly on one to four unit residential income property), real estate investors have the ability to take potentially ruinous inflation and turn it to their advantage. Of course, if you borrow a lot of money (as the U.S. treasury has from many foreign governments), inflation means the dollars you have to pay back will be worth very little. Imagine what the rents on your income properties will be like in twenty or thirty years into the future .... even the worst performing investment in current dollars will be looking pretty sweet by then, provided you have obtained fixed rate financing. Thus the old expression: 'do not wait to buy real estate, buy real estate and wait.'

When is the best time to buy insurance? Why, before you need it, of course. Currently, there is very little inflation in the U.S., and some sectors have seen deflationary pressures, such as, for instance rents in most markets. Does this mean that you do not need to think about inflation? In a word, no. This is the time to take the steps you absolutely must take if you want to have any purchasing power in the post-financial crisis future.

As the price of gold bears witness, many people around the world are losing faith in the once-almightly U.S. dollar. If those people had actually seen the charts showing the expansion in the money supply that began during the depths of the financial crisis, they might have even less faith. For, the U.S. has set upon a course of monetary expansionism that is, I believe, unprecedented in its scale in historical times. Even billionaire investor Warren Buffet believes inflation is on its way: Bloomberg reports that Buffet said: 'a country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, it is going to inflate its way out of the burden of that debt.'

Here is where the smaller residential income property makes sense. Only on these properties can you lock in fixed rate thirty year financing. While you can get a fixed rate on commercial properties (five units and up), you will only have a rate lock for a much more limited time. By the time your rate lock expires and it is time to refinance, the rates will likely have increased dramatically. Not so with the conventional thirty year fixed rate loan. The people who lock in as much as this high-quality debt as possible to purchase income producing properties will look like geniuses a few years down the road, once the effect of the monetary expansion has finally been felt in earnest. Indeed, this may even be something of a self-fulfilling prophecy in that the more people flee the dollar, the more they will invest in commodities such as oil, which will in turn, stoke higher inflation. Get it?

I do feel sorry for people who have entrusted their life savings to the tender mercies of the financial services industry and the pathetic 401K. The meager percentage of after-inflation return you can expect to get on such accounts (after expenses) in the future will never be enough to provide for most peoples retirement needs. Why not opt out and place your trust in what you already know is a good investment: an income property in a good location with a long term fixed rate loan. That is something you, not Wall Street, can control, manage, and profit from for years to come.

Real Estate Investors

One of the biggest reasons small businesses fail is because the owners cannot separate themselves from the daily processes to focus on improving, growing and making their business a success. They are stuck working 12 hours a day handling the daily processes and burn out. Real estate is similar in many ways. Here are 5 reasons most real estate investors fail.


1) Lack of focus & business plan – Many investors try every strategy possible with 10% the focus they need to have success with one strategy. Pick one strategy, document it in a business plan and master it before moving on to a 2nd strategy.

2) Poor or lack of a mentor and support group – It is always good to get advice from a mentor and other experts. They will point out unnecessary risks, provide solutions and even save deals or save you from a failure.

3) Wrong strategy – Many investors are followers and do what everyone else is doing or they choose a strategy that just does not work in their market. Some of the most successful investors do exactly what everyone else is not doing. Do your homework and choose the right strategy.

4) Lack of effort and time – This one is obvious. Many new real estate investors get excited and work hard for 2 days then do nothing for 2 months. You have to write down goals and what it will take to achieve them, put together daily tasks and complete them on a consistent basis.

5) Lack of knowledge – I have seen my share of messy deals – from do-it-yourselfers who do everything poorly, to inexperienced investors in way over their head. You should master your strategy and have the knowledge, systems and team in place to be successful in real estate investing. And always be thorough in your due diligence.

Pending Sales Highest in 3 Years

WASHINGTON (Reuters) - Pending sales of previously owned U.S. homes unexpectedly rose in September to their highest level in nearly three years ahead of the expiration of a popular tax credit for first-time buyers, a survey showed on Monday. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in September, rose 6.1 percent to 110.1 -- the highest level since December 2006. It was the eighth straight monthly rise in the index, the longest streak since the measurement started in 2001. Analysts polled by Reuters had forecast pending home sales, which lead existing home sales by one to two months, to be flat in September after rising to 103.8 in August. "What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," said NAR chief economist Lawrence Yun.  "Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery." The Pending Homes Sales Index surged a record 21.2 percent in September from the same period a year-ago.

First Time Home Owner Tax Credit Likely To Stay; But Current Homeowners Still Face Uncertain Future

As the, so far, jobless recovery continues, the White House is reportedly hunkered down trying to figure out what to do next. Obama administration officials are taking note of programs that have worked and those that have not done as well.


Among the programs that apparently fall into the “success” column is the $8,000 tax credit for first time home buyers.

The tax credit for first timers was part of the $787 billion dollar stimulus program and is being credited with helping the real estate industry stage a modest comeback—at least among first time home buyers.

All indications are that the tax credits will be continued well into 2010 and maybe beyond. Some legislators have even suggested that the credit amount be increased to help sales in places such as coastal California, where home prices tend to be much higher than in many other parts of the nation.

While helping first time buyers is great, we are still struggling with what to do with current home owners who cannot afford their mortgages and face foreclosure…still a growing problem.

With the unemployment rate expected to only get higher in the months ahead, and with thousands upon thousands of mortgages on the verge of resetting soon at much higher rates, no real recovery in the real estate market is likely until the foreclosure problem is dealt with more effectively than it has been. And, so far, it hasn’t been dealt with effectively at all.

The president still is resisting going to bat for a change in bankruptcy law that would allow judges to adjust mortgages–something he strongly advocated as a candidate.

And, despite some self congratulating newspaper ads, most major banks have been loath to adjust homeowners’ mortgages by any method other than reducing interest while leaving principal alone. Not a good way to go about this, many economists argue.

Helping lots of first timers buy a home while allowing countless current homeowners to be booted from their properties makes little sense…politically or economically.

4 steps congress can take to improve the real estate market

Several nationally known experts in real estate and the economy shared their perspectives during a recent forum and charity event for the Orange County affiliate of Susan G. Komen for the Cure.

Among them, real estate analyst and investor Bruce Norris of The Norris Group in Riverside, CA, recommended that Congress do several things to boost the real estate market. These include:

1) Increase the number of loans made available to well capitalized investors: Expand Fannie and Freddie loan programs from a maximum of 10 loans per investor to an unlimited number of loans for qualified investors.

2) Make the 203K FHA loan program available to investors: A 203K loan allows a property needing work to be purchased "as is," but included in the loan amount is money for repairs. The loan funds both the purchase and rehab of the property. Investors need this loan now, but this loan is currently only available to owner occupants. FHA previously made this loan available to investors, but stopped the practice in 1996 when HUD ran out of lender owned, fix uppers. Banks could solve the vacant house problem by giving investors back the 203K loan program.

3) Eliminate the 90-day waiting period before a repaired property can be sold to a buyer using an FHA loan: Investors who purchase fixer uppers can often completely repair the property in a matter of weeks. But the current law prohibits investors from reselling the property within 90 days. The assumption is that fraud must be taking place if a property is resold within 90 days. It's ridiculous to assume that every investor who purchases a property, improves and resells it is committing fraud. All this policy does is increase investors' costs of purchasing and rehabbing vacant homes.

4) Allow loans to be taken over by credit-qualified new buyers with no down payment. Through this process, which was successfully used in the 1980s, new buyers simply step in and take over the loan payments. The only stipulation is that the loan has to be made current at the close of escrow. The U.S. currently has about one million owners who will not be capable of keeping their homes without a huge discount on the principle balance. Many of these properties have fixed rates at very favorable rates. Allowing willing and capable buyers to come in and take over these loans would help contain the spread of foreclosures across the country.

August 09' PDX Metro Stats

Single Family Residences

• 54% of homes were 3 bedrooms - avg price $259,805
• 40% closed in 30 days or less
• 21% closed in 121 days or more
• 47% of buyers used conventional financing
• 31% of buyers used FHA financing
• closings were down 7% from last month (1656 vs 1782) 

Economic Updates

Economic Updates


Posted: Monday, September 14 at 09:11PM

Last Week in the News

--------------------------------------------------------------------------------

According to the Federal Reserve, consumer credit debt fell in July by $21.6 billion, an annual rate of 10.5%. It was the biggest decline since recordkeeping began in 1943. Economists had forecast consumer debt would drop $4 billion.

Total consumer credit debt in July was $2.47 trillion. Meanwhile, the figures for June were upwardly revised. Consumers reduced their borrowing in June by $15.5 billion.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending September 4 rose 17% to 648.3 from 554.1 in the prior week. Purchase volume rose 9.5% to 304.1. Refinancing applications increased 22.5% to 2,651.2.

The Commerce Department reported gains in both trade imports and exports, which indicates that the worst recession since the 1930s may be ending. Imports in July rose 4.7% to $159.6 billion. It was the largest monthly advance since recordkeeping began in 1992 and the second monthly increase after 10 monthly declines. Exports rose 2.2% to $127.6 billion, the third straight monthly increase.

Initial claims for unemployment benefits fell by 26,000 to 550,000 in the week ending September 5. The figure was lower than the 560,000 that economists had forecast. The number of people continuing to claim jobless benefits in the week ending August 29 fell by 159,000 to 6.09 million.

The Reuters/University of Michigan consumer sentiment index for September increased to 70.2 from 65.7 in August. Economists had forecast a reading of 67.5.

The Commerce Department said wholesalers reduced their inventories by 1.4% in July, following a revised 2.1% drop in June. It was the 11th straight monthly decline. Meanwhile, sales at the wholesale level rose 0.5% in July, the third consecutive monthly gain.

Upcoming on the economic calendar are reports on retail sales on September 15, the housing market index on September 16 and housing starts on September 17.

The Blood Bath is About Over

THE BLOOD BATH IS ABOUT OVER


Posted: Thursday, September 10 at 09:00PM

I wanted to take a moment to highlight an important market indicator that has shown significant promise in the past few weeks. The national home supply has fallen down to its lowest levels since December 2008. In June, there was 9.4 months of supply on the market, down from a year-ago level of 11.0 months.

It’s one more sign that the housing market may be mending itself. Housing supply is an important metric because home values across every U.S. market are rooted in supply and demand. When the supply of available homes outpaces buyer demand, home values tend to fall. And, by contrast, when homes are relatively scarce, values tend to rise.

We’re still a long way from historical averages, but dwindling home inventory may be one reason why the national median sale price rose by $7,000 last month.

It is important to remember that home sales of late have been spurred several key factors including low mortgage rates and the First-Time Home Buyer Tax Credit. A NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May, and that the number of buyers looking at homes is up nearly 12 percentage points from June 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said there are very good opportunities. “Despite some of the challenges, the housing market continues to demonstrate signs of recovery,” said McMillan. “The temporary first-time buyer tax credit is clearly helping people make a decision and is contributing to the overall stimulus impact, but since it’s taking longer to close transactions, many would-be beneficiaries may not be able to take advantage of the credit before the December 1 expiration date.”

The S&P/Case-Shiller index for home prices in 20 major cities in the three months ended June 30 was up 1.4% from its level in the three months ended May 31. It was the first time the index rose two months in a row since mid-2006. Prices gained in 18 of 20 markets, but were still down 31% from their July 2006 peak.

These numbers mark a definitive slowing in the downward spiral since 2006. "Momentum matters," said Robert Shiller, the Yale University economist who helped create the index. "This is a sudden break in momentum."

We are now hearing almost daily reports of “good news” in the real estate sector. This good news compounds upon itself and begins to move the market in a more definite direction of growth. One component of the Case-Shiller index, consumer expectations of where the economy will be in six months, rose to 75.8, its highest since the recession began in December 2007. Consumers' assessment of present conditions also improved, along with stepped-up plans for buying homes, autos and several major appliances.

At a macro level economists and real-estate professionals warn that a recovery in housing is likely to be bumpy: Home prices could drop again as job losses drive foreclosures higher. However, there are various markets that have suffered so greatly, that they will begin to surge in the coming months regardless of a few bumps on the national scene. We are working diligently to identify these markets, so that your clients will enjoy a maximum benefit of the economic recovery.

Taken from MasonHill.com/blog