I love a good puzzle?

In the early days of "stay home, stay safe" my daughter and I did a fair number of puzzles.   I have always loved puzzles; jigsaw puzzles, crossword puzzles, sudoku and real estate puzzles.  I think that's why I like working in real estate so much as there are lots of real estate puzzles.

Here are a few examples of real estate puzzles.

When you need to sell your house, to buy your next house; Navigating this depends on the tolerances of the client; can they stand the stress of two transactions at once?  Would they be better off selling, renting for a bit and taking time to find their new home?  Does the idea of moving twice drive them mad?  Solving this puzzle is about tolerances and the market.  

When you have a certain amount of resources (time and money) to fix up the house for sale; what projects need to be done from a repair point of view, what projects bring the most return,  what projects will appeal the most to potential buyers?  

We want a rental unit how do we best do that; build an ADU, add an addition to our existing house, keep our existing house as a rental and buy a new home, buy a rental.

Real estate puzzles are made up of many pieces:  the dwelling, neighborhood, condition, size, resources of buyer/seller, household and life pressures (new baby, aging parent, job relocation).  Also in play are market conditions, interest rates, economy, school districts, local property and income taxes, local regulations regarding tenants, energy efficiency zoning and use etc.  

Don and I have been grappling with a real estate puzzle for a few years (puzzles aren't always solved quickly). That puzzle is how to downsize to a dwelling capable of one story living, energy efficient (we're nerds that way), with room for his tools and building materials.  We have a variety of resources, though not unlimited, one of which is Don's ability to build or fix most anything.  

There are plenty more real estate puzzles, some solvable and some not.  I'm always glad to discuss your particular puzzle. We may conclude it's not solvable at the time, may identify some things to work on to help solve it, or might even solve it neatly and quickly. What kind of real estate puzzle have you been working on?

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.

Is that a bedroom?

This has become a hot topic in my office, so I thought I'd share.

We often see properties listed in the multiple listing service, that somewhere in the public or private (viewable only by brokers) remarks say something like, "third bedroom is non-conforming" or "basement bedroom is non-conforming".  And usually that house will be listed as a three bedroom, and come up in searches as a three bedroom, even if only two are "conforming".  Conforming to what?

Much of Portland's housing stock is old, and has had a variety of work done to it over the years.  Much of that work was done without permits.  For instance, consider a house that at one point had an unfinished attic. The real living space of the house was on the main floor. Somewhere along the way, someone slapped some wall board on the wall, installed a few outlets, maybe some heat and maybe walled off some rooms.  Over time, someone else installed carpet and built a closet or two.  Thirty years, and a few owners later, the property is sold with the attic considered finished and with bedrooms up there. 

So what makes a bedroom?  Some say it needs an egress window (big enough and positioned so one can get out in case of emergency), a closet, a heat source and a door.  I believe the City of Portland doesn't care if it has a closet.   Appraisers may.  Appraising is a whole different blog.  The stairway leading to the attic can also enter into this discussion. Is it one of those super steep, narrow stairways?  

Now, lets move that "finished over time" room to the basement.  Same thing right?  It was originally unfinished, and over time growing families eked out extra space by putting in some walls, power and heat.  The work was done without permits.  Many of these rooms do have a window, but its way to high and small for one to get out in an emergency. 

I find there are a few ways to think about these spaces.  Certainly, having the work done with City permits is the best. While we've all seen things slip past inspectors, if the space is permitted, it probably fulfills the life/safety issues (decent stairs, egress paths, reasonable plumbing and electric etc.).  But permitted space is the gold standard, and going back to permit already finished space can have its challenges.

So, next best might be non-conforming space that addresses these issues, but wasn't permitted.  I see LOTS of these properties.  They have an egress window in that basement bedroom, that one could get out in an emergency, but may not fit the specific requirements of a permitted egress.  There is either a grade level exit door from the basement, or a decent staircase out. There is no visible scary plumbing or electric work.

And then there are the non-conforming spaces that really are just a finished room in a basement or attic. No decent egress, maybe no heat, wanky staircase to get there.  These rooms can still be of value to a buyer as many folks don't actually need that space as a bedroom, but want it for office, study, man/woman cave, hobby room, storage etc.  But bedrooms, they are not.

So when I see a listing that is listed as three bedroom, but in the notes it says the third bedroom is non-conforming, I'm expecting a two bedroom house, with some sort of bonus room. Depending on where that comment is written, my buyer client may not even see the non-conforming remark, and is thus expecting a real three bedroom house.  Brokers list that house as a three bedroom for a few reasons; pressure from the seller, and the desire for the house to come up on searches by buyers who are looking, not necessarily for three bedrooms, but for two bedrooms plus a bonus room.

So what?  I really think we need to stop calling something we know is not a bedroom, a bedroom.  No matter what.  But what about the gray areas?  That's the hard place.  There is no definitive way for us, as brokers, to know if a bedroom is conforming.  Oh yeah, if there are recent permits on file and the tax documents show it as a bedroom, that is a good bet.  But otherwise, I think we do our best to call the rooms what they are, and use the "third bedroom may be non-conforming" option when we're pretty sure it is a bedroom, but want prospective buyers and other brokers to know it may not be; lack of permits,  no closet, lack of heat.  Of course, those comments need to be visible to all, and if one got so far as an offer, would also be listed in the seller's property disclosure.

Buyers and sellers out there, what do you think? You are, after all, the customer.

Foster Powell

I've just listed this house in the Foster Powell neighborhood, and thought I'd write a bit about the neighborhood.

The house is located at 3910 SE 67th Avenue; between Powell and Holgate on SE 67th.  This two (plus bonus) bedroom, two bath house  is priced at $229,000. It sits a half block from Kern Park.

Kern Park is small, with a ball field and playground. My clients have loved having the park so close by; with a dog and small child it has been a real asset.

The Foster Powell neighborhood, in general is made up of modest homes. Some were original homesteads dating to the turn of the century.  Others have been filled in over the years.  The neighborhood, bounded by Powell, Foster and SE 82nd Avenue (The Avenue of Roses?).

There are a variety of grassroots efforts taking place in the neighborhood, including a proposed community garden at SE 62nd and Powell.  ODOT, who owns the land, recently approved a proposal for the garden.  Then there is the project to reclaim the neighborhood alleys.  The folks at Foster Green EcoDistrict and working on the alley project.

The neighborhood has some good eats, from Carts on Foster, to the venerable Ichidai Sushi on SE Powell ( a personal favorite).  Foster Burger is popular too, along with Bar Carlo. 

Give me a call if you'd like to see the little house pictured above, or if you have any real estate questions you'd like answered.

Sell your house now or later?

A client asked the other day, for a primer on timing the sale of their Portland home.  They've relocated out of town and, should they move back to Portland, they've realized it wouldn't be to their existing house.

 

They have great tenants in the property, but the rent doesn't cover their monthly payment, so they are subsidizing the rent by about $300 a month.  Should they sell this year, or wait until 2014?

Here, in a nutshell, was my response:

Our current market, close in on the eastside is moving incredibly quickly. The comparable houses to theirs are getting accepted offers with in days, as in 2-3 days, of going on the market. There is high demand from buyers and a low inventory of good homes for sale, so prices are rising. 

Interest rates are low, and are being kept artificially low by the Fed.  As the economy recovers, (and housing),  we expect the Fed to stop keeping those rates low.  As rates rise, fewer buyers will be able to afford the home.

We expect prices to continue to rise for the rest of this year, perhaps with some seasonal slowing.  But, as prices rise, we will most likely see more sellers entering the market; especially those who previously couldn't get enough for their home to warrant selling.  As so much of the current price increases are a result of high demand and low supply, those increases will likely slow. 

These particularly clients are most likely planning to sell.  The unknowns of waiting, combined with the amount they subsidize the rent each month makes waiting not particularly attractive.  They'll likely wait until their tenant's lease is up, or perhaps offer the tenants some sort of consideration for their cooperation in letting us market the home during their occupancy.

If you have questions about your property and situation, get in touch as I'd be glad to chat and give you answers that take your specific factors into account. leslievjones@gmail.com