Saturday, February 10, 2018

The 2018 federal tax changes and Portland real estate

It was hard to miss the changes to federal tax code that were quickly enacted in December 2017.  Previous tax overhauls entailed months of committee work and hearings, which vetted out most of the inconsistencies and grey areas.  The December 2017 tax changes left more room for interpretation and fine tuning.

I don't expect to see much effect on Portland real estate as a result of the changes.

 Limiting the property tax deduction to $10,000 per year on a personal residence won't hit many of us. While we do see some property taxes over $10,000, that's pretty high value house.

The interest on home equity loans and lines of credit will no longer be deductible.  But, it is thought that if such loans are used to invest in real estate, including remodeling or adding to your existing property), that interest may be deductible  This is one of the grey areas in which we may see some rule making in the months to come.  In any case, I'm not sure that lack of interest deduction will change behavior.  And if home equity interest IS deductible for real estate (and improvement) investing, it really won't change behavior. 

I talk with many clients deciding whether to add on/remodel their existing home, or move.  My advice is always this: if you like where you are,and the finished product will be the home you want, stay and remodel.  If you want a different area, or even with work, your house won't be what you want, consider selling and moving.  Will the lack of deductibility of the home equity to do the work change this?  I doubt it.

As we saw, the tax changes seemed to hit hardest, those states with high income tax; of which Oregon is one.  High net worth folks, especially moving toward retirement, tend to avoid such states.  We may then, see fewer very wealthy folks moving here, or choosing to stay here. 

So maybe, with the combination of the property tax deduction limit at $10,000 and the hit to states with high income tax, we might see that upper end of the real estate market soften a bit.

Certainly, there were other changes to the tax code that will change household financial pictures.   So much of this depends on your specific financial situation.  As far as our local real estate market, I don't anticipate much effect. 

If you have questions about your specific real estate situation, get in touch.  I'd be glad to talk with you.   503-312-8038

Friday, January 12, 2018

2017 Year-end housing stats - Portland

RMLS just released the housing stats for 2017.

Focusing on the Portland area, our year to date median sales price was $379,900, up 9.5% from $347,000 in 2016.  I expect we'll see the rate of increase slow a bit in 2018, to something like 8%.

In 2017, we had 31,624 closed sales, down 3.6% from 32,798 closed sales in 2016.  The year has started off quickly.  I'm guessing, at the end of 2018,  we'll be similarly close.

Our year to date market time was 45 days, as compared to 42 days in 2016.  Toward the end of 2017, we were definitely seeing buyers a bit more relaxed at not having  to race out immediately to see a new listing.  Some buyers even had the luxury of seeing a house a second time, before choosing to write an offer.  I welcome this wee bit of slowing, and think both buyers and sellers make better decisions when not acting in a pressure cooker. 

And we finished the year with 1.6 months of inventory, up a tad from December 2016's 1.3 months of inventory.  This slight bump in inventory was also a welcome change, giving buyers more properties to consider.

These numbers bear out what I had been feeling.  We did slightly less business, still saw prices increase a bit.  Personally, I did 3 fewer transactions in 2017 than in 2016, but made slightly more money.

The Portland market remains a sellers' an extent.   With the extreme frenzy of 2015 and 2016 gone, sellers do have to price according to comparable properties, usually have to do an amount of repairs as a part of selling, and often don't have a plethora of offers from which to choose.

We're in a funny spot, where it is a good time to buy or sell.  As the year progresses, we expect to see interest rates edge up. as high as 5% toward the end of 2018.  This increase will decrease buying power for buyers getting loans, and could put a bit of downward pressure on pricing. 

If you're thinking about making a move, or just curious, get in touch.  I'd be glad to talk!  503-312-8038.

Sunday, December 31, 2017

Leslie’s annual real estate report 2017

In December 2016 I said, we’d see easing of lending restrictions and consumer protection measures in lending, inventory would remain low, and the median price wouldn’t increase more than 10%. I said we’d see interest rates rise, that the small, expensive newly constructed apartments would become over-supplied, Portland would probably see some rent control measures, and President Trump would ease lending restrictions.

The Trump administration is easing some lending regulations, and pulling back on some of the consumer protections of the CFPB.  We are seeing the return of “no doc” loans; loans to those with good credit ratings and sizeable down payments, who don’t have W-2 income with which to qualify for a loan.  We’re also seeing “desk appraisals”, that is, an actual site visit and appraisal report are not done by a licensed appraiser, but rather a computer program/algorithm assesses the value of a property.  Combined, this means people who might not qualify for loans are, and property values aren’t being scrutinized.    Hmm.  I don’t love this, even if being right feels good.
Our median price increased by 9.5%.  I was right! Interest rates rose, but not significantly.  I was right! Small, expensive apartments do appear to be over built as they now offer a variety of move in specials.  The rental market has slowed a bit, with rents not escalating as quickly.

Portland continues to be in a housing crisis for low income tenants, and the houseless.  The City of Portland extended the “housing emergency”, restricting landlord’s ability to move tenants out, without a lease violation.  The City is proceeding to put together an office of Landlord-Tenant affairs.  Landlords (myself included) are wary of the city further regulating rentals.  I’d much rather see the City make it easier and cheaper to build low income housing and pursue non-conforming Airbnb “hosts”.

Beginning in January of 2018, properties being marketed for sale, in the city of Portland, will be required to have a Home Energy Score, with an assessment, done by a provider so licensed.  We’re guessing they’ll cost around $300.  Sellers will need to get the assessment and score BEFORE putting their house on the market.  “For sale by owners” are also subject to this rule, if they are to publicize their property for sale.  The score is on a scale of 1-10, and is a product primarily of the soundness of the building envelope, combined with the efficiency of heating and water heating.  Our house, built in 2003, got a score of 9!  As it is newer, it is well insulated.  We don’t have a fancy furnace, nor fancy hot water heating (though both are gas).  We do have solar.  Without the solar, our score would have been a 7.

This year’s market was a bit like that of last year, but that our busy times were not quite as crazy, and our slower time, perhaps a bit slower.  While multiple offers still exist, there are usually 2-5 offers, if there are multiples at all.  In 2015 and 2016, some houses were seeing 15 – 20 offers.  Aspirational pricing is still a problem, with sellers slow to accept the news of a slightly slowing market.  This leads to price reductions and longer market times as properties sit, and suffer from the “there must be something wrong with that one” phenomenon.

My crystal ball is still blurry!  At this writing, the house and senate have both passed tax reform bills, that are now being reconciled.  Without getting into the minutiae of the yet to be agreed upon bills, here are a few highlights.  There is talk of lengthening the time a homeowner must own their home, to claim the tax exemption (when selling) of $250,000. The rule has been one must live in the home two of the last five years, with the proposed rule would requiring a full five years of occupancy.  The other change being discussed would limit the mortgage interest tax deduction.  The National Association of Realtors projects: “If both mortgage interest and real estate taxes deductions will be eliminated, home prices expect to fall from 9% to 13%.  A decline in value as projected could mean a loss in home value of $28,130-$42,200 for the typical homeowner.”

Whatever the case, I do expect we’ll continue to see a slowing on the rate of appreciation.  Look for our median sales price to increase around 8% in 2018.    This is still healthy appreciation, and far more sustainable than even the 13.1% we saw in 2016. 

Portland continues to be the “affordable” option for the west coast, and a popular destination for people from a variety of demographics.  We’ll continue to see considerable cash purchases as baby boomers secure their retirement homes and transfer their wealth to the younger generations. 

With a slightly slowing market, we’ll see some real estate agents leave the business – mostly part time agents who have a harder time closing enough transactions to cover the costs of doing business.  We’ve seen a few mergers and buy outs of real estate companies this fall, and may see more of those, especially the consolidation of smaller companies. 

I remain honored to help folks with some of the biggest decisions in their lives, and humbled by the trust that is put in me.  My business is based on referrals. I will always take good care of anyone you send my way.  Be it selling or buying, or just curious, I’m always here to help, answer questions and provide information.

Thursday, December 14, 2017

Home energy scores, part two

It is still early days for Portland's home energy scoring program, taking effect January 1, 2018.  To be in compliance, homeowners planning to sell early in the year are getting the homes scored now.  There are sure to be some bumps along the way.

Here are a few random facts, ideas and thoughts.

Square footage: The home energy score is looking at conditioned space.  That is, within the thermal boundaries where there are dedicated heat sources.  Square footage in property listings includes ALL space, finished or unfinished, heated or unheated.  There will be discrepancies between the square footage listed in the RMLS and that on the home energy score.  This okay and expected.  these differences do not have to be reconciled, but are sure to drive some folks crazy.

Bedrooms:  Similarly, what it takes to consider a room a bedroom varies.  A newly permitted bedroom through the city is probably the highest standard.  Bedrooms, listed in the multiple listing service vary a lot; attics with super steep stairs and very little headroom, basement bedrooms without sufficient fire egress, a loft etc.  For the purposes of the energy scores, the certified evaluators are given some license.  If a room is being used as a bedroom, but doesn't fit the rigorous criteria of the city, for purposes of the score, it may be considered a bedroom. But...even if  the energy scorer calls it a bedroom, it may not be a bedroom for purposes of selling.  This too may drive some people crazy.

ADUs: In obtaining a home energy score for a home with a detached ADU, only the actual house need be evaluated.  The ADU does not need its own score.

Outside of Portland: The certified evaluators can do assessments and provide home energy scores outside of Portland, though this is not required.  If done, the scoring will be done using the Department of Energy's scoring rubric, not the City of Portland program,  They are quite similar.

That is it for now.  There is sure to be more information on this program as it comes into use.

If you have questions on home energy scoring, please feel free to contact me.  I've made a point to educate myself and may be able to help.  503-312-8038.

Sunday, October 29, 2017

Home Energy Scores...coming soon

The City of Portland is adopting new rules requiring homes listed for sale (not just with Realtors, but in any public way; craig's list, facebook etc) have a Home Energy Score done by a certified provider BEFORE listing.  This will take effect for any new listings starting January 1, 2018.

This is an effort to give houses something similar to the miles per gallon rating we use in evaluating cars.  There is proprietary software using an algorithm somewhat similar to that used by the Department of Energy.  The evaluation is primarily of the building envelope, and does not consider appliances, nor variations in human behavior.  It does look at the efficiency of furnaces and hot water heaters.

The certification for providers is rigorous, with I believe nine providers certified to date, and more in the pipeline.  They'll be busy, getting all those houses rated by January 1, 2018.  Some providers are home inspectors, adding this to their menu of services.  Others are folks who have been doing some sort of energy efficiency work already.  Prices have yet to settle out, though it sounds that most will be charging between $200 and $300. 

Houses will be rated on a scale of one to ten, one being less efficient and ten more efficient.  Houses with scores of five or lower will get recommendations for improving the score, along with an estimate of the new score, should the recommendations be implemented.  The report includes estimates of how much energy the home is likely to use and the annual cost.

Since my husband and I are kind of energy nerds, we've already had a Home Performance study done a few years ago.  This is a more involved process, using a blower door test and other evaluation methods.  For kicks, and so I'll be familiar with the process, I had a Home Energy Score done last week.  Our evaluation was done by PDX Hive.  The process took about an hour, and they needed access to both our crawl space and our attic.

WE GOT A NINE!!!  This was just a draft as the final software product isn't quite finished yet.  Our house is a bit over 2000 square feet, built in 2003, with an average gas furnace and gas hot water heater.  Being built in 2003, we do have plenty of insulation and double paned windows.  In addition, while we have plenty of windows, their placement and size are reasonable.  We do not have air conditioning, and we do have 3.36 kW of solar panels on our roof.  Once the software is ready, PDX Hive will give me an updated score.  I've also asked for what our score would be without the solar panels, as I'm curious.

I'll blog more on this in the near future.  If you are selling your house in the new year, you will need the energy score before listing.  This is not part of the buyer's home inspection process.  Some sellers may choose to complete some of the suggested work to increase their score.  I am hopeful the providers will have an efficient way to complete a re-evaluation quickly and at a reduced cost. 

Contact me for more information, or with questions.  503-312-8038

Tuesday, October 17, 2017

A much needed market update!

Despite what your friends and neighbors might be telling you about Portland's active real estate market, it really is slowing down a bit.  Slowing down a bit means, the rate that prices increase is slowing, market time is getting a tad longer, there are slightly fewer sales, and slightly more houses on the market.

Here are a few numbers to help tell the story.  The year to date, median sale price in the Portland metro area is $379,900.  That is up 8.5% from September 2017, and up 10.1% year to date from last year at the same time.  Closed sales are down 3.2% year to date, from the same time last year.  Our market time, year to date this year, is 43 days.  Year to date last year was 41 days.    And inventory, (active residential listings at the end of the month divided by the number of closed sale for that month) is at 2.3 months.  Up from 2.0 months in August, and up from 2.0 months in September of last year.  Right now, prices aren't falling.  The rate of increase is declining.

The other part of the story can be seen in the price reductions on current listings.  From October 1 to October 17, 2017, in the 97202, 97206, 97214 and 97215 zip codes, there were 116 residential properties (detached and attached) that had price reductions.  Does that mean prices are falling?  Not necessarily.  Many sellers have been pricing, shall we say, "aspirationally", and not in relation to the sales data in their neighborhood. 

Anecdotally, we are still seeing a very active market in the more affordable price ranges; under $350,000.  Good houses in this price range are seeing multiple offers, and offers over list price.  In the higher price ranges, buyers have gained a bit of power in the market place.  As we near the holidays, sellers may be more willing to take lower offers, pay some of the buyers closing costs, or take on more issues that come up on an inspection. 

These numbers don't look like a crash, nor a bursting bubble.  They do feel a bit like a reality check; a reminder that buyers won't just pay ANY price. 

Sellers, if you are needing to get your home sold before the end of the year, now is the time to lower that price and get your property noticed by buyers in the market place.  Buyers, if you got tired of losing out in the busy spring, you just might find a decent house to purchase at a reasonable price.

Get in touch of you have questions about your specific property, neighborhood or situation.   503-312-8038.

The RMLS report.

Friday, August 11, 2017


I'm pretty good with change, or at least I like to  think so.  My work is about helping people with change.  Almost by definition, people buying real estate are in a state of change.  Minimally, buying or selling an investment property is a state of financial change.  Buying or selling an owner occupied property is a pretty big change.

For some, buying or selling is the change itself; moving.  But for some, the real estate transaction is both a result of change, and the change.  Many real estate transactions start with a life change.  Some life changes are happy: marriage, cohabiting, birth of a child, new job.  And some life changes are less happy: death, divorce, financial hardship.

Physicists think of Newton's first law of motion: an object at rest stays at rest and an object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force.  In our personal lives we often hear the advice not to make any big changes after a large event in our lives. hmm.

I work in an industry full of change. Technology, interest rates, housing trends, environmental changes, government regulation, climate change, political climate and many more factors effect the real estate business.  We are also an industry that is a target for disruptors.  Just as the taxi (Uber, Lyft and car sharing) and hotel (air bnb) industries have been disrupted, there are LOTS of innovators and entrepreneurs trying to figure out how to disrupt, or get a piece of the real estate industry.

Lately, there has been a ton of change around me.  Any one thing isn't so big.  But wow.  We have a new agent services coordinator at our office, we have a new (returning) leader at RE/MAX equity group, RE/MAX is doing a big re-branding this month (which means we'll be changing logos and marketing materials).   My yoga studio closed, my personal trainer is moving out of state, my daughter is moving out, we have two new tenants in our rentals and so on.

Taking a page from Newton's book, I'm planning to harness the energy around all of this change to make some changes myself.  Resisting change just might be the "unbalanced force" of which Newton speaks.