Portland Condo Market Update - May 2008

A recent reader prompted me for a condo update for Portland and it’s time to oblige.

Interestingly, the inventory of condos and townhomes has not ballooned with the slower sales market. In fact, since my last update in August 2007, the market contains just a couple hundred additional units. It’s not an insignificant number, but clearly, developers have cooled their jets, even converting some projects to luxury apartments while existing inventory is absorbed.

On the other hand, it’s not likely that all units available are marketed in RMLS. From a developer’s standpoint, there is little value in listing a multitude of identical units — thereby showing a surplus in supply and a weak bargaining position. So, consider this report a high-volume sample, just like the other reports I’ve done.

As of May 12, there were 3,896 active condo/attached home listings throughout the Portland metro area. The average list price is $329,000 for 1,344 square feet. In the August 2007 snapshot, the area had 3,675 listings at an average 1,336 sq. ft. and list price of $333,300.

In the past six months, the average list price is down just 2%–bringing the average price per square foot down to $245.

Like last time, I first rolled up condos and attached homes in the same analysis, then broke them out separately. The tables below show 1) Condos and Attached Homes together; 2) Condos only; and 3) Attached Homes only. All sorted by average list price:

Please note, this is just a snapshot as of May 12, 2008 of the active listings in the local multiple listing service. It may not include inventory sold by owner or through developer sales groups. Every effort has been taken to ensure accuracy, but is not guaranteed.

With a quarter of the active listings located in the City Center, I’ll be back later in the week with and update on downtown sales and active listings.

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Add comment May 14th, 2008

Life Expectancy of Housing Components

Perhaps it’s because my home is going on 20 years old and I’m in the throes of making costly updates (windows, furnace, roof, etc.), but lately I’ve been making particular notes about the age and condition of homes’ costly components when touring with clients.

When viewing a home listing, in addition to the cosmetic aspects of the home, I pay particular attention to items like the furnace, roof, and deck — costly replacement items that may need attention from the new owner in relatively short order.

If you’re in the market, you might want to educate yourself on these issues in advance. To help, The National Association of Homebuilders conducted a study in 2006 on the effective life of many housing components. I chose a handful of areas to display here, particularly considering our NW climate and environs:

Appliances:

• Gas ranges: 15 years
• Dryers and refrigerators: 13 years
• Compactors: 6 years
• Dishwashers: 9 years
• Microwave ovens: 9 years

Decks:

• 20 years

Faucets and Fixtures:

• Kitchen sinks (acrylic): 50 years
• Faucets: 15 years
• Bathroom shower enclosures: 50 years
• Shower doors: 20 years
• Showerheads & toilets: Lifetime
• Whirlpool tubs: 20 to 50 years

Flooring:

• All natural wood flooring, and marble, slate and granite: 100 years
• Vinyl floors: 50 years
• Linoleum: 25 years
• Carpet: 8 to 10 years

Heating, Venting and Air Conditioning:

• Furnaces: 15 to 20 years
• Heat pumps for 16 years
• Air conditioning: 10 to 15 years
• Tankless water heaters: 20 years
• Electric/gas water heater: 10 years

Roofing:

• Slate, copper and clay/concrete: 50 years:
• Asphalt-shingle roofs: 20 years
• Fiber cement shingles: 25 years
• Wood shakes: 30 years

Siding and Accessories:

• Brick, engineered wood, both natural and manufactured stone and fiber cement: Lifetime
• Copper gutters: 50 years
• Aluminum gutters: 20 years
• Copper downspouts: 100 years+
• Aluminum downspouts: 30 years

Windows and Skylights:

• Aluminum windows: 15 to 20 years
• Wood windows: 30 years

Note that these are functional lifetimes. Kitchens, bathrooms, appliances, paint, etc. have much shorter stylistic lifetimes. Obviously, these guidelines are highly dependent on local weather conditions, proper building and design, material quality and adequate maintenance. I can think of a few other exceptions too, like EIFS and LP siding.

Something to keep your eyes open to when touring homes 10+ years or older. You might want contractors to certify roofs, inspect furnaces, provide replacement costs, and give you additional advice during your home inspection timeframe.

The link is broken on the NAHB website, but I’ve got the full, detailed report here.

2 comments March 18th, 2008

Toeing the Party Sewer Line

The city of Portland has stepped in to provide relief to homeowners dismayed to find themselves on the hook for unforseen, major sewer repairs.

But for a prospective home buyer, a $100 video will help you avoid such shock.

Hopefully, by now it is commonly understood that an inspection of the sewer connection is an integral part of a homebuyer’s inspection procedure. For the uninitiated, a sewer inspection consists of running a fiber-optic camera down the home’s sewer connection all the way out to where it meets the city’s main sewer. The cameras are calibrated to show their distance down the sewer line, so if a crack, tree root intrusion, broken joint, or other obstruction (rats!) is found, it can easily be located in the yard. When it’s done, the potential homebuyer usually gets a DVD or tape of the inspection–their own ‘dirty movie’.

If damage is visible, then repairs become a negotiable item between the seller and buyer. Most of the simple line replacements I’ve seen have run in the $3,000 to $4,000 range. But it can be a lot more–particularly when it comes to the dreaded party sewer line. These are sewer lines that collect from multiple homes, sometimes traverse over several private property lots, and eventually find their way to the city main.

On January 2nd, the Portland city council unanimously approved a subsidy to share the cost with homeowners of replacing party sewer lines with individual connections to the city’s main lines. Over 3,000 properties in the city of Portland are still affected by party lines, particularly those on large lots in older neighborhoods that were subsequently divided to build new homes. The inner SE is especially affected.

From The Oregonian:

The plan…guarantees homeowners a rate of $2.98 per square foot of lot to run city sewer lines near their home. That’s nearly $15,000 for a typical 5,000-square-foot lot. The city will pay the rest of the cost for the work. Homeowners must also pay a plumber to connect their house to that city line, which often costs $1,000 to $2,000, Danaher (city sewer manager) said. That’s still much cheaper than the $25,000 to $60,000 bills homeowners typically face, she said.

So, potential homebuyers, while the city subsidy might be viewed as relief to the existing owners who were staring down a $50,000 estimate, your $100 inspection lets you see the filthy truth with your eyes wide open–and watch it over and over.

Photo: Mark from City Sewer, getting some footage on a 1993 property in Tualatin. Yes, it is advisable to check newer lines, especially if they are long runs out to the city main.

Technorati Tags: Portland, Oregon, real estate, sewer, inspection, scope, disclosure, repairs, party line

Add comment January 9th, 2008

2008 Changes in Oregon Real Estate Practice

It’s a new year Baby, and with it come a handful of modifications to Oregon’s real estate practice.

The 2007 Legislature passed a few items that have impact on homebuyers and sellers, and Oregon’s largest multiple listing service, RMLS, has made some changes, too.

Here’s a summary*:

RMLS Listings Numbers Change: The listing identification number on properties for sale in the multiple listing service has changed. Starting January 1, all new MLS listing numbers start with an ‘8′, as in RMLS# 8000043. This is standard procedure for RMLS, however, it does not ensure that the listing is NEW in 2008. Listings can change brokers, be removed from the market temporarily and relisted, or are merely refreshed with a new number (a practice that is frowned upon). Check with your broker for details for a history of how long a listing has REALLY been active.

Contracts address Measure 49, sort of: The Oregon Real Estate Sale Agreement commonly used by Oregon Realtors, now contains language addressing the recent passage of Measure 49. Like the previous language for Oregon’s Measure 37, the language cautions buyers and sellers to know their rights and the rights of neighboring property owners under the provisions of the new law. Those rights might seem a little murky right now as the courts and counties grapple with land use applications and lawsuits.

Flippers Get Relief: Oregon House Bill 2498 provides an exception to the licensing requirements for general contractors. Previously, if you were in the business of buying properties and fixing them up for re-sale (flipping), you were required to have a contractor’s license. Now, you may work on up to three existing homes and market them for sale per calendar year. Please note that if remodeling requires building permits, the property owner is required to hire a general contractor to perform the work or supervise subcontractors.

Tax Withholding: This change may bite a few investors this year. Oregon House Bill 2592 created a provision for tax compliance withholding at closing for all non-resident owners. So, escrow companies will now be required to withhold a percentage of sales proceeds at closing from out-of-state or foreign owners that do not qualify for an exception.

The withholding amount is the lesser of: 1) 4% of the consideration; 2) 4% of the net proceeds; or 3) 10% of the gain includable in taxable income.

The exceptions include: 1) when the consideration is less than $100,000; 2) if the property is acquired through foreclosure; or 3) if the seller is advised by ‘professionally competent knowledge or advice’ that it is a non-taxable transaction (i.e. tax-deferred (1031) exchange, sale of a principal residence, etc.). Real estate investors, beware…and talk with your tax advisor!

Other changes: Other changes for 2008 on Oregon’s real estate forms include new warning language surrounding legal lot or parcel validation and some minor changes to property disclosure language, but I won’t belabor them here.

*Note: I am not a tax or legal advisor, but have written this to highlight some of the more significant changes to Oregon real estate practice.

(Disturbing) photo by LifeSciences used under Creative Commons license.

3 comments January 2nd, 2008

Comcast Redefines Home Shopping Network

Million-ton media gorilla Comcast has rolled out an interactive real estate shopping channel on its On-Demand network in Portland (one of only a handful of markets nationwide), where you can plop down in your Barcalounger to channel surf up to 3,000 property listings each week.

If you have Comcast On-Demand service, check out channel 888, and look for the Real Estate section. Homes for sale in the Portland metro area are sorted by area and price range. Make a selection and sit back while a 15-second spot for each listing appears. Every listing gets 3 digital photos treated with the Ken Burns effect, plus a text-to-speech narration of the agent’s comments to complete the video advertisement. Each segment lasts 7 minutes for a total of 20 - 28 listings per segment.

A local company, HouseInDemand.com is the exclusive Portland-area agent for selling these ads. I daresay they are going to be raking it in as agents look for new cost-effective, digital means to market their listings. I haven’t used it yet but HouseInDemand’s listing templates has made the process verrrry easy from what I can tell, so even technophobe agents should be able to create their ads effectively.

HouseInDemand claims over 25,000 viewers during just its second week of operation. (The On-Demand client base in the Portland area is approximately 400,000 viewers.) I suspect some of this traffic is due to the ‘looky-lou’ factor and their advertising blitz. For the next week, I would expect to see a fair bit of the Buena Vista inventory getting some pre-auction promotion.

For agents, it’s a relatively affordable advertising outlet—just $115 per week for ‘TV advertising’, arguably a better deal than pouring well over $100 into a one-shot, 4-line Open House ad in the Sunday Oregonian. But it won’t reach non-cable broadcast viewers, alternate cable provider or Dish/Direct subscribers.

So, I’m a DISH subscriber and haven’t used the Comcast On-Demand service. Has anyone out there seen Channel 888, and do you think homebuyers will use it to shop for a new house?

Is it Comcastic or merely bombastic?

Technorati Tags: Portland, Oregon, homes, houses, marketing, advertising, Comcast, cable, on demand, real estate

5 comments December 10th, 2007

Week Links - November 30, 2007

A sampling of Portland-related real estate links from the last week or so. Forecasters and prognosticators are making the rounds. I’ll share additional notes next week.

Home Builders Association of Metropolitan Portland forecast
Analysts Jerry Johnson, John Mitchell & David Ludwig address the Home Builders Association of Metro Portland. Net message: A slow 2008, perhaps slower than 2007, but a strong rebound in 2009.

Ryan Frank of the Oregonian covers the HBA Forecast. KGW’s coverage of the same event

Portland prices defy national trends
The front-page article in the Oregonian this week that buoyed some spirits.

Jeffrey Kempe, local real estate broker, drags us into his Conversation Pit with timely thoughts about green building, the upcoming Buena Vista auction, and a significant change to Oregon state law as it pertains to sales by out-of-state homeowners.

Yet another New York Times article
The NYT continues its love-fest reporting on the Northwest, this time on the coastal town of Manzanita.

(I should mention the previous NYT article which documented the in-migration phenomenon surrounding Portland quoted my recent clients Richard & Lila. Cheers and hope you are enjoying the new digs!).

Technorati Tags: Portland, Oregon, real estate, news, stories, reporting, links

Add comment November 30th, 2007

Google Terrain Hints at Topo Features

I admit I am something of a Google Maps fanboy.

Starting with their user-friendly search interface, Google mapmeisters have continued to innovate with features like drag-and-drop multi-stop directions, traffic density views, user-generated maps, and most recently, the Street View. Good stuff for real estate-related information gathering.

Now, they’ve added a new layer–Terrain, which provides topographic information for the map you’re viewing. Just like using the satellite view or traffic views, just type in the address want, then click the “Terrain” button in the upper righthand corner.

It isn’t particularly detailed and you can’t zoom in as far as other views, but it does give a quick peek at whether that listing you’re researching is in a canyon, on top of a ridge, or in the flats.

Close-up of West Hills

For an out-of-town buyer or someone unfamiliar with Portland-area topography, it’s very useful information, especially if the Street View is not available at that location.

Technorati Tags: Portland, Oregon, real estate, Google, maps, topography, terrain, search

1 comment November 29th, 2007

An Oregon Property Tax Primer

It’s nearly Halloween and there’s a knock at the door. It’s not a kid in costume…it’s the tax man.

It’s property tax time in Oregon. For new and potential residents of the metro area, Oregon’s property tax methodology can seem a little bit like black magic. This post is not meant to be a definitive guide by any means, but property taxes are a common question for home buyers in Portland. For the uninitiated, Oregon property is

…taxed on its assessed value. A property’s assessed value is the lower of its real market value or its maximum assessed value. Each year, the county assessor determines the property’s real market value and calculates its maximum assessed value. You are taxed on the lesser of the two, which is called the assessed value. (From the State’s explanation of property taxes.)

In essence the real market value is what someone would pay for it under today’s market conditions. Maximum assessed value (MAV), on the other hand, is based on the assessed value of the property as determined in the mid 90’s plus 3% annual increases since then.

Controversial tax limitation measures in the late ’90’s capped the annual assessment increases to 3%, and set their basis level at 1995 valuations, less 10%. Since we haven’t had any market crashes lately with real market prices dipping below mid-90’s valuations, the MAV basis is most often used for most Portland metro residences.

(See, I told you it was black magic.)

Answers to a few questions I receive frequently:

• Aren’t property taxes limited to a 3% increase annually? No. The increase in your property’s assessed value cannot go up more than 3%, but if your tax districts have passed revenue-generating levies and bond measures for public safety, schools, libraries, etc, it will be reflected on your bill. Multnomah County residents are taking on a healthy increase to pay for shortfalls in Portland Public School budgets. Clackamas County residents passed 11 revenue-generating measures for this tax year.
• Are taxes reassessed when the property changes hands? No. But they can be affected by new construction or improvements. Remember, in most cases, the tax is not driven by the real market value.
• Why is there such a disparity in property taxes from neighborhood to neighborhood, even house to house? On top of the basic property tax assessment by the county, each home is taxed according by other taxation districts, including fire, safety, schools, and more.

A few more generalizations to help homebuyers in in the Portland metro market:

• Most homes are generally assessed by the maximum assessed value method, not the real market value method.
• You will pay more in property taxes the closer to the city enter you get.
• You will pay more taxes in Multnomah County than for similar properties in Washington or Clackamas counties.
• Tax bills are due November 15, but taxes are prorated in escrow to Oregon’s July 1 tax year.
• Property taxes are relatively predictable because of the tax limitation measures tied to the Oregon constitution.

One of Portland’s alternative newspapers recently ran a summary article on the state of our property tax system…and some of the inherent iniquities it has created. Newly reinvigorated neighborhoods are taxed at much lower rates due to those property values being set at 1995 levels, when they were low-income areas and not so desirable.

As the article points out, the taxes may not seem fair from property to property, but they are predictable from year to year. That predictability may forestall any major overhauls of tax policy if put before the voting public.

Here is the State’s official property tax overview.

Technorati Tags: Portland, Oregon, tax, property, assessed, market, value, rate, real estate

6 comments October 24th, 2007

Credit Protection On The Cheap

With qualifying guidelines tightening for mortgages, it should be clear by now that safeguarding your credit rating is a top priority if you want to receive the best rates and terms.

Credit protection scams, er, plans abound, offering all manners of credit monitoring at prices as high as $15+ per month. I have no experience with these programs, but have always been a little suspect of their fear-mongering and pricing policies.

Here’s an alternate monitoring method for the more frugal among you:

By federal law, you are entitled to one free credit report each 12 months from each of the three credit reporting bureaus, Experian, TransUnion, and Equifax. However, rather than requesting and reviewing them all at the same time, space your requests to one report from just one bureau per quarter. If you alternate bureaus each time, then voila, you’ve got year-round monitoring for free.

Please note:

The OFFICIAL site for the FREE credit report is www.annualcreditreport.com. Don’t let other derivative URLs that include FREE, ANNUAL, CREDIT and REPORT fool you.

Be aware, that your credit score is NOT a part of your credit report, but it can be obtained for as little as $8 using www.annualcreditreport.com.

New protections are on the way for Oregonians.

In Oregon, a new ID Theft Protection Act (Senate Bill 583) law goes into effect October 1, 2007, whereby you can ‘freeze’ your credit information. This is a common practice in 37 other states, but new for Oregon.

Under a credit freeze, only a very limited group of organizations (existing creditors, property managers, and law enforcement officials to name a few) will have access to your credit report. So, in theory, bad guys won’t be able to get new credit cards or open store accounts using your stolen identity. Note, the freeze can take up to 5 days to go into effect after you request it.

And here’s the hitch: It’ll cost you $10* to set up the freeze with each credit bureau, and then $10 each time you want to temporarily unfreeze your credit to buy a new car, furniture, etc. with a new creditor. Considering that Oregon is the 13th worst state for identity theft, the peace of mind might just be worth the expense and inconvenience.

For more information on the ID Theft Protection Act, visit http://www.dfcs.oregon.gov/id_theft.html or call (503) 947-7492.

Technorati Tags: credit, report, score, identity, theft, FICO, protection, FTC, freeze, Equifax, Experian, TransUnion, mortgage, underwriting, Oregon

* Unless you are a victim of identity theft or have reported the theft of your personal identifying information to a law enforcement agency. Check here for details.

Image by Lazy_Lightening. Used under Creative Commons license.

Add comment October 1st, 2007

Addressing the Rent vs. Buy Conundrum

This Sunday, The Oregonian published a timely article by Julie Tripp entitled, To buy or to rent?.

Over the past few years, the answer to the rent vs. buy question has unequivocally been BUY. Easy financing, scorching year-over-year appreciation, and a high in-migration rate has meant that most home buyers could bail out or turn their property quickly–often at a profit after just one year.

But the recent sluggish market calls that strategy into question, even in the healthier-than-the-national-average Portland area.

Call me conservative, but even at the peak of the housing boom in Portland, I cautioned buyers that their minimum window of occupancy needed to be at least two years. Capital gains tax could chew into their proceeds, and secondly, the closing costs associated with both the original purchase and the impending sale would devour much of the equity appreciation.

Now, the discussion tends to be more about waiting for deeper price reductions in the market (so as not to catch the falling knife, as one reader put it) or simply renting to avoid all the uncertainty. So, is it better to rent and invest (assuming you’re disciplined!) the down payment plus the monthly difference in payment in say, the stock market?

The New York Times has an elegant calculator that you can use to evaluate the rent vs. buy decision for yourself.

The calculator starts with some basic defaults (monthly rent, % down payment, property taxes, etc.) that you can update as you see fit. Additional factors can be tweaked with the Advanced Settings links. Sliders control the amount of sales appreciation and/or rent increases. For some perspective, Portland’s housing market has appreciated around 8 percent annually since 1973. (You can contact me with questions about other variables specific to Oregon.)

In the Oregonian’s real world example, the break-even was 2.7 years in purely financial terms, which sounds about right to me (in most cases).

In most cases, the decision isn’t purely financially-driven. But the numbers can help ‘justify’ the intangible factors of pride of ownership and creating a sense of community and permanence.

Technorati Tags: Portland, Oregon, rent, rentals, homes, appreciation, investment, purchase, calculator, Oregonian

5 comments September 24th, 2007