Our latest infographic featuring the February Residential Review for the Portland Metro can be found below. As the data shows, the sales price saw a slight draft – though not significant for this time of year. The number of new listings hitting the market has increased, but there is still a high demand, as seen in the continued low inventory and increase in closed sales.
If you’re a seller in the area and interested in what this data means for you, call us at 503-312-4642. We would be happy to schedule time to discuss the options for your property as well as share how our extensive marketing plan and expertise in the local market can benefit you.
If you’re a homebuyer in the area and wonder how you can find a home that fits your needs in a market with low inventory, we are here to help. We have a team of local agents and can match you with the person best suited for your search. Just call us at 503-501-2454!Construction on the N Williams Corridor
Since mid-September, the N Williams Corridor has been a haven for this construction activity, as the city improves the safety for this bicycle byway – a project three years in the making. The expected benefits should benefit those who travel through this area soon.
This $1.5 million grant-funded project is intended to create a safer place to travel for everyone. According to the City of Portland’s transportation department website, construction is expected to be completed within the next three months. This project was intended as a safety action for pedestrians, cyclists, and motorists in the area.
So far, left side bike stripping, shared use pavement markings, speed bumps, and test diverters have all been installed. As the project continues, plans to implement curb extensions will be completed as well as “Pass on the Right” pavement stencils for the bike lane. In the meantime, cyclists traveling through the area can travel on NE Rodney as an alternative and those driving can always use N Interstate or NE MLK Blvd, though the need for an alternative route is minimal.
Construction in the area isn’t new, however most of what residents usually see is due to the boom in housing, retail, and restaurants along the corridor. New buildings and a vibrant, growing neighborhood has not just required this increased safety project, but also has increased home values considerably over the past few years.
Since this general area crosses NE and N Portland, both are worth considering. A look at the Market Action data from 20 years ago (January 1995) shows that N Portland’s average home price was $70,200 and NE Portland was averaging $103,200. The most recently published data (January 2015) shows N Portland averaging $301,900 while NE Portland is at an average of $359,900. If you’re interested in homes in the N Williams Corridor area, check out the available listings here.Calculating a Good Investment Property
If you’ve decided that purchasing an investment property is right for you, the next step is to figure out what constitutes a good investment. You can check what we look for in an investment property here – the post is older, but the idea is the same. Once you know what type of property you want, and in what condition, you need to figure out if a particular property is worth the money – after all, it is an “investment.” There are various formulas to calculate whether an investment is “good” for you. The simplest is the ROI – return on investment. It’s simple because you just need to compare what you’ll get out of it to what you’re going to have to put into it. However, it’s perhaps a little too simple. The three calculations below will provide you with a more strategic outlook on such an investment.
Cash on Cash Return = Annual Before Tax Cash Flow/Total Cash Invested A higher cash on cash return is typically a better investment (“typically” because it doesn’t account for appreciation/depreciation). This calculation is overly simplistic, but a quick way to determine if further examination is warranted. Let’s say an investor puts $150,000 down on a $600,000 property and expects to generate a $4,000/mo. return on that property, after expenses. The before tax income would be $6,000 x 12 = $72,000. So, the Cash on Cash return would be $72,000/$150,000 = 48%.
Gross Rental Multiplier = Sales Price/Annual Rent The lower the GRM, the better the investment. This calculation, like the above one, is highly limited, but it can be compared to the area’s average GRM. To get information on that, contact your Realtor®. In the above example, if the monthly rent were $12,000, this would give you an annual rent amount of $12,000 x 12 = $144,000. The GRM would then be $600,000/$144,000 = 4.2 (rounded up).
Capitalization Rate = Yearly Income/Total Value The higher the cap rate, the better. Let’s consider the running example of the $600,000 property. With a yearly income of $72,000/$600,000, the Cap Rate would be 0.12 (or 12%). Where this differs from the cash on cash is that it does allow for appreciation/depreciation. Let’s say in 3 years, the value of that home rises t0 $1.2M, the Cap Rate would be 0.06 (6%), a much less favorable number. The investor could then consider options.
At the end of 2014, RealtyTrac® released an analysis of fair market rents and median home prices. Most markets – and the market overall – said buying is better than renting. In areas with an increase in millennials, like Portland, the rental market showed increasing strength. With more renters in the market, having a good investment property can prove to be the right move for many. If you’re interested in what investment properties Portland offers, give us a call at 503-406-5232.Jan 2015 RMLS Portland Market Action Shows Increased Inventory, Decreased Average Price
The latest RMLS Portland Market Action data was released last week, and our latest infographic is below. Two notable points in this data are the inventory level and the average sales price change.
As the infographic notes, there was an increase in new listings and a decrease of closed sales compared to December 2014, which pushed inventory up to a recent high. Looking back at the RMLS Portland Market Action data covering 2012, 2013, and 2014, there has been a trend of increased inventory early in the year. This has been followed by a decline as home sales increase in the spring, With an inventory higher than recent months, but lower than previous years’ January data, it will be interesting to see what inventory does in the coming year.
The second notable feature of the RMLS Portland Market Action data is the shift in average sales price. Although January 2015 shows an increase from January 2014 and the 12 month rolling average sales price also shows an increase, there is a decrease from last month. Home value projections shown an expected increase of about 4% nationwide for 2015. So, it will be interesting to see what happens in the local market in the coming months.
Based on the data you’ve seen, what expectations do you have for the 2015 housing market in the Portland metro area? Do you think we will see a boom in early spring inventory? Or an unprecedented low followed by a huge summer?Turned Down for a Mortgage? What to Do Next
One reason it is recommended to get pre-approved for a mortgage early in the home buying process is to reduce barriers once you find a property. However, the pre-approval process is not a guarantee. While it is not common, there are occasions when a client has their home selected and is ready and willing to sign, only to have the mortgage denied. The good news is that there may be options available; getting turned down for a mortgage isn’t necessarily the end for every buyer.
The first thing to understand about the mortgage process is that a pre-approval is completed by a mortgage professional, not an underwriter. This means that a buyer’s loan is likely to be approved, based on the information the mortgage professional has been provided. An underwriter may have more specific requirements that a buyer may not meet.
According to a recent post in the Wall Street Journal, the primary reason reported for denials, for both purchases and refinances, was applicant credit history. Other major reasons may include a high debt-to-income ratio and borrowers with insufficient funds in reserve. These issues may cause problems for some lenders while other lenders may allow some blemishes. If you are denied, you may not be completely out of luck. For many buyers, there are options available.
Step 1: Find out why your mortgage was rejected. Lenders are required by law to issue a written “adverse action notice” within 30 days when rejecting a mortgage. This notice must include the reason for the rejection. Once you know why the mortgage was rejected, you can work to correct any errors on your credit or work with your mortgage professional to see what other options are available.
Step 2: In certain cases, the reason for rejection can be argued to your favor. If that is your situation, you can request a second opinion, just like you might ask a second opinion for a medical diagnosis. Some lenders have a second tier of review that will allow you to present your case – including discussing any issues that are currently marring your credit history. Some buyers have been successful in implementing this step to receive approval.
Step 3: If you are still without a mortgage after the second opinion, or if your lender does not allow it, the next option is to shop around. The underwriter’s job is to assess risk and different lenders have different assessment criteria. One lender may reject your application for a reason that another lender will allow. These three steps are not a failsafe, but they can assist some buyers.
No matter why you were turned down for a mortgage, if there are blemishes on your credit that you know about now, it’s best to take care of these sooner rather than later. And, if you have questions about the mortgage process or about your specific mortgage application, it’s best to discuss them with a mortgage professional who can present options that match your situation.
* some photos from freedigitalphotos.net | Stuart Miles5 Things To Consider When Buying a Home
Is Buying a Home Right for me?
Buying a home used to be the default American Dream. The real estate market crash/bursting of the bubble changed the market to some extent. Whereas buyers that could afford $300,000 wanted to spend $350,000, and often could, today’s buyer might be able for afford $300,000 and only be comfortable with a $250,000 purchase. For some, the best decision may be to rent, bucking the “Now is a great time to buy” hoopla. The selection of a real estate agent, a mortgage broker, the inspections you have and understanding the process is more important that ever before. I hope you find these Five Things To Consider When Buying a Home helpful:
1) Selecting an Agent
Your real estate agent should be your trusted advisor. Our role is to give the best advice possible and execute and negotiate your decisions. Your role is to listen to the advice and make the best educated decisions based on the information available. It has to be a mutual, trusted relationship. No two agents are going to be the same. You can look at online reviews, ask for referrals, and interview until you find the right match. A team may have different points of contact that specialize in certain areas of the transaction whereas an individual agent will be your single point of contact from beginning to end. There are pros and cons to both models.
2) Selecting a Lender
Most buyers need a loan to purchase a home. Some are blessed with enough cash to skip this step. Talking to a lender should always be the first or second step in a real estate purchase. If you’ve selected a Realtor®, ask them for their referrals. The working relationship between the lender and the Realtor® is critical to your transaction. “Going local” is also important. There is nothing more
frustrating than trying to get a critical piece of information from a lender that closed at 2PM because they are on Eastern Time. I’ve been told by a mortgage manager that, “we really can’t help with that as we are a call center, not an actual office of lenders.”
3) Understanding “Agency”
A real estate agent either represents the buyer, the seller, or both. When the agent represents both it is referred to as “Disclosed Limited Agency” or “Dual Agency.” As a business practice, the Turner Team will not practice dual agency under any circumstance, other than if we represent a bank owned property. We believe that you want to make 100% certain that your agent represents your best interests throughout the transaction. Others will argue that there are some deals that will only come together and may potentially save their clients some money by the agent taking a reduced commission. The Agency Disclosure Pamphlet is a required handout by ALL Oregon real estate agents at “first contact.”
Inspections are a part of the buyer’s due diligence. The default timeframe in the offer paperwork to complete and negotiate any repairs or credits is 10 business days. Inaction means the buyer accepts the property as-is, so it’s wise to consider a home inspection as non-optional. Other common inspections include a sewer scope, radon testing, oil tank search/locate, and soil samples (if a tank, or evidence of a tank, is found). The home inspector may recommend a specialist for specific areas of concern – as a general practitioner might recommend a cardiologist. All inspections are buyer-paid; plan to budget $500-$800 for an “average” property. Learn more: Oregon Buyer Advisory.
5) Understanding Earnest Money
Earnest money is money sent to the title company, after your offer is accepted, to show that you are “earnest” about buying the property. It is usually in the form of a personal check and becomes part of the down payment. If you are putting $100,000 and your earnest money is $5,000, you’ll be bringing in $95,000 (plus closing costs) at closing (usually about 30 days after your offer is accepted).
These 5 Things To Consider When Buying a Home are just a few of the key things you will need to know as a first (or second, or third) time homebuyer. This process can be challenging and confusing. However, it will also be a positive investment in your future, and with the right agent or team, it can be a positive experience. When you’re ready to take the first step, give us a call at 503-406-5232 and speak to an agent that knows the area and the business, and who will work for your best interests.
Are Portland distressed properties on the upswing? The current data, provided by RMLS and shown on the right, shows that the final quarter of 2014 revealed an increase in distressed homes – markedly in Bank Owned/REO properties. In September 2013, we wrote a blog about a downshift in Portland distressed properties which showed a considerably lower distressed rate of 7%. What does this mean for our market?
Because distressed listings typically sell for 15-20% below market value, this can mean considerable savings for buyers who might be interested – although not everyone will be. Before homebuyers begin rejoicing at such savings, it is important to know what these properties mean for a homebuyer. After all, this option isn’t for everyone.
Distressed properties are those that are being sold because of negative financial situations. Short sales are properties being sold for an amount less than what is owed by the current owners and Bank Owned/REO are those that have been foreclosed on. The savings that stem from reduced asking prices is enticing to many. However, this doesn’t mean that these properties are always the best deal.
Many of these homes have serious damages and repairs that need to be made. You’re not likely to find a gaping hole like this one, but there are, more than likely, a significant amount of repairs that will be needed. Some of these may be visible, but others may not be. You will want to make sure you know what repairs are needed before you close.
Banks by law are not required to make any disclosures regarding the condition of the property. Other properties require full disclosure, but banks are not held to the same accountability because they may not have current information. This means getting reliable information about a foreclosed property’s physical condition can be challenging, which translates into an added risk for the buyer. Because of this, you will need to make sure to get inspections done on the property so that you are well-informed on the true condition of the property.
In a traditional real estate transaction, there can be some negotiation on repairs after an offer is accepted (during the inspection period). Will the seller pay for repairs? Maybe. Will the seller reduce the price with the contingency that the buyer will make the repairs? Perhaps. However, in a distressed property situation, the home is offered on an “as is” basis. Hiring a contractor to make the repairs can significantly add to the cost of the home, so if you’re considering purchasing, work with a trusted contractor (we can recommend some that our clients have used in the past) who can look at the property and give you an estimate.
For buyers still interested in distressed property, the increased percentage of available Portland distressed properties is great news. Even better news? We can assist you in the home buying process. Our team can help you find the properties you want as well as put you in contact with trusted contractors to help you estimate and then make necessary repairs.
Give us a call at 503-406-5232 when you’re ready to check out the current inventory!
*One of the images on this post came from freedigitalphotos.net/phasinphoto.
RMLS Portland Market Action & 2014 Year End Review
The RMLS Portland Market Action report recently released for December 2014 offers insight not just to last month, but as a year-in-review. Our most recent infographic (shown below) provides a visualization of the trends of the last three years. The main theme? It’s a seller’s market so buyers need to position themselves to compete.
One of the figures that points towards this is the notable 2.3 month inventory level. That level shows that if no other homes were to enter the market, it would take 2.3 months to sell all of the current inventory. The infographic below reveals that it is the lowest in recent years. To give some context, a quick view of our past RMLS Market Action posts reveals that it goes beyond the three years shown. The last time we saw such a low inventory count was back in March of 2006 – over 8 years ago! Low inventory means added value for every seller in the market.
This RMLS Portland Market Action report also shows an increase in closed sales and a notably reduced market time from last year. This means that a reduced inventory isn’t marked by reduced transactions. Buyer’s are still looking for homes. The law of supply and demand shows that reduced supply with continuous (or increased) demand will positively influence the price to ensure an economic equilibrium.
For those considering selling their home, this winter seems to be the “perfect storm” for a solid asking price and quick market movement. The RMLS Portland Market Action report reveals the continued increase in average sales price, which combined with low inventory and all signs showing that active, serious buyers are looking puts any seller at a higher advantage. In addition, economists believe that the low interest rates we’re currently seeing will increase through 2015, and buyers know this.
For those who have been considering selling their home and either upgrading or downgrading their home, real estate experts note that now is the time to take action. Those looking to buy and sell will find a better price for their current home and reduced interest rates on their next home purchase. In some ways, now isn’t just a seller’s market; it’s a real estate market – an everyone’s market.
For buyers, the lack of inventory means the competition can be fierce for an accurately priced home. While the highest offer and cash terms is like having a straight flush, the hand can still be beat (by a royal flush). It’s important to talk to your agent [ (us ] about the other components of your offer and how to set yourself apart from the pack.
The average sales price in Portland (Metro) was up 7.2% to $333,000 from $310,600 in 2013. That’s way down from the double digit gains (12.9%) last year but brings us closer to the historic national average of 4% appreciation. The crystal ball? If inventory stays low and rate remain at historic lows throughout the year, appreciation is going to be driven those factors. There’s some more data in last week’s post about the impact interest rates and appreciation factors can have on buying power.
*above images from freedigitalphotos.net
NBC Nightly News just aired a segment on mortgage interest rates and a renewed refi craze. 30 year rates are down from 4.5% this time last year to 3.81%. The experts crystal ball is that rate will remain low but now is the time to act if you are thinking about a refi. Does a refi make sense to you with these interest rates? Talk to a lender and see what your break-even point is. Thinking about buying a home? I used this mortgage calculator to run these comparisons:
A $300,000 house with 10% down at 4.0% for 30 years has a monthly principle & interest payment of $1289.
A $300,000 house with 10% down at 4.5% for 30 years has a monthly principle & interest payment of $1368
A $300,000 house with 10% down at 5.0% for 30 years has a monthly principle & interest payment of $1449.
A $325,000 house with 10% down at 4.0% for 30 years has a monthly principle & interest payment of $1396.
A $325,000 house with 10% down at 4.5% for 30 years has a monthly principle & interest payment of $1482
A point increase has a bigger impact on the payment than a $25,000 price increase.
Here’s the full segment: