Those market stats

RMLS released the February numbers this week, and they look a bit mixed.   By mixed, I mean, busy, but not the craziest we've been.

I tend to put to most stock in looking back to the same month of the previous year,  as this helps normalize for seasonal slowing and surging.

So, when compared to February 2016, our pending sales are down 15%.  That is significant.  And closed sales are down 7.9%.  It's taking 45-60 days in escrow to get a sale closed, on average, so maybe some of that slowing can be attributed to the January snowpocalypse.

We're at 1.9 months of inventory in February. Meaning, at our current rate of sales, it would take us 1.9 months to sell everything currently on the market.  February 2016 was 1.8 months, a barely discernible difference.

In looking at the percentage change in the 12 month median sales price, compared with the previous 12 month period, we see a median sale price of $350,000 as compared to $310,000.  This early in the year, I prefer the rolling 12 month numbers as year to date calculations don't have  much meaning.

And lastly, our market time is a tad longer 62 days for sales closing in February 2017, as compared to 60 days on the market, for sales closing in February 2016.

Out in the market, it feels kind of like those numbers show.  We're still busy.  Buyers are out in force, and making aggressive offers.  But it doesn't feel crazy, for which I am thankful.  Perhaps we're all learning how to be in this kind of market.  Maybe listing agents have learned how best to communicate with regard to offer review timelines, and maybe buyers, and their agents are accustomed to offer deadlines, multiple offers and needing to offer highest and best offers?

Whatever the case, I welcome this feeling of sanity, while being busy.

See the full RMLS report.

How clean?

After all the flurry of buying and/or selling a house, as closing and moving nears, I am often asked, how clean the house should or will be.

In the early stages of a real estate transaction, we negotiate both the close date, and the possession date; that is when the sellers must be out of the home and the buyers are entitled to the keys and possession of the property.

Even super organized people, with the best of intentions, can come up short on time at the end.  And often what "gives" is condition in which the house is left.

The sale agreement is pretty silent on this, saying only," Seller shall remove all personal property (including trash and debris) that is not a part of this transaction, and deliver possession of the property to the Buyer...".So this basically says all the "stuff" needs to be gone.  From this, we have gotten to the "standard" that a property should be "broom clean".  That is, the seller need not have done, or hired, a deep cleaning, but the place should be swept up and empty.

The reality, is the condition in which properties are left varies greatly.  Some sellers take great pride leaving their property sparkling and clean for the new buyers; either hiring professional cleaners or doing a spiffy job themselves.  Many sellers do a fine job of removing all the "stuff" and doing a quick wipe down of surfaces.  And, as you might imagine, some sellers leave all sorts of messes.

While you might generalize about pricier properties being left in better condition, you'd be wrong.  Time pressed and inconsiderate sellers are found across all price ranges.

And whether we are representing buyer or seller, we try to set the expectations of how a property should be left.  But moving is hard, and the cleaning comes at the very end.  Sometimes buyers are greeted with a mess, and given the option of taking the property as is, or waiting a day or so to give the seller a chance to clear it out.  And sometimes real estate agents, representing buyer or seller, will pitch in to make sure a property is at least broom clean.

My advice, whether you are a buyer or a seller, is to allow more time for cleaning and moving (in or out) than you think you'll need.

See Part 2 next week for information on the remedies available to the buyer.

Some thoughts on "rent control"

So here is the thing about the “rent control” proposal recently adopted by the city.  The one that has us paying relocation costs for tenants if the rent is raised over 10% per year, and if tenants are given notice to move for “no cause”.

I work in the housing industry, both as a Realtor and landlord, along with volunteering for and contributing to community development groups.  Through my hard work, I have made decent money in the housing industry and am glad to give some back and be a part of housing solutions.

You know the argument that says we can’t change PERS, even though it’s killing our state budget, because public employees made the choice to forgo higher salaries in the interest of the pension? The same could be said for landlords.  My husband and I made the choice to forgo evenings and weekends, affording vacations, investing in pensions etc, in the interest of our rental properties. We invested in real estate under non-rent control rules.

Now, the rules under which we entered into being landlords, are being changed by the City of Portland, and perhaps the State of Oregon. 

We work hard and strive to be good landlords, are responsive to repair issues and requests, are understanding when a tenant needs to pay late here and there.  We’ll move the rental due date if a tenant’s pay schedule makes paying on the first hard.  Only in the past few years have we raised our rents during tenancies, and started doing so to not get caught with low rents should rent control come along.

Renting out one’s property is a bit like letting someone live in your bank account.  Take properties we have invested lots of money and time in, and hope the tenants don’t mess it up.  Yes, this is our choice.    Much like the PERS employee who gets the delayed gratification of a pension over higher current wages.

I want control of my properties.  I want to be able to use a no cause eviction if I need to. 

I would be willing to pay an annual, per unit fee, into an emergency housing fund, for low income tenants.  I’m fine with the 90 day noticing rules and the cap on rent increases above 10%.   I don’t quite understand why I should pay moving costs of a high earning tenant, because I want control of the property I own and for which I have sacrificed.

Recent Market Stats

RMLS released their numbers for January 2017 earlier this week.  As you might remember, January was a bit of a funny month, with all that winter weather.  We see some effect of the weather in the numbers.

But first, inventory remains quite low, at 1.7 months.  That means, at our current rate of sales, it would take 1.7 months to sell all the properties currently on the market. We started 2016 with 1.8 months, and 2015 with 3.4 months.

New listings in January were actually up from December (no surprise as many folks don't want to market their property during the holidays),  but were down 12.2% from January 2016.  Pending sales in January 2017 were 11.3% cooler than January 2016 - I think this is at least in part due to the winter weather and road conditions.  Similarly, closed sales were down ever so slightly from January 2016, also probably due to weather, as title companies and even county recording offices were closed a few days in January.

Looking at the percentage change of the 12 month median sale price, compared with the previous 12 months, we see a 12.9% increase from $309,900 to $350,000.

Market times were a bit longer in January, that darn weather again. Area wide, houses that sold in January, were on the market an average of 58 days.  But some of Portland's hotter areas saw shorter market times, with North Portland at 28 days, and Northeast and Southeast Portland at 49 and 50 days respectively.

Anecdotally, the market is quite busy.  We're right back in multiple offers, with selling prices well above list price.  If you're thinking of buying, get in touch so I can give you some tips on buying in a seller's market.  And if you're thinking of selling, I'd love to help you navigate the process.

Committing to a lender

 I have written before about the importance of working with a reputable, local lender.  We are still in a seller’s market, and who your lender is can affect whether or not your offer is accepted.  A local lender understands the mores of our real estate market, knows the ins and outs of buried oil tanks, party sewers and radon. 

Many buyers really want to shop for a lender and a loan.  The Consumer Financial Protection Bureau has taken steps to make comparing loan programs and lenders more approachable. 

If you are planning to start the home buying process, talking with a Realtor and getting started on the loan process are good first steps.  These days, sellers and their agents expect an offer to purchase be accompanied by a pre-approval letter.  This letter states the buyer has submitted the necessary paperwork, the file has been through underwriting and has been approved for a loan at a certain amount.

In the past, some buyers have gotten pre-approved, but waited to really shop for a loan until their offer has been accepted.  As the lending process has become more complicated, and closing timelines have lengthened, it has become important for the actual loan file for a buyer, on a specific house, to be started right away.  The buyer really doesn’t have a few days to talk to potential lenders, submit paperwork to a variety of places and make a choice.

The time to shop for a loan is BEFORE your offer is accepted.  In Oregon, the standard forms Realtors use now bind the buyer to the lender who provided the pre-approval letter that got the offer accepted.  Switching lenders requires seller approval, and can put the transaction in jeopardy.  Switching lenders or loan programs in the middle of a transaction makes the buyer look flakey and causes the seller and listing agent to question the buyer’s ability to perform. 

A real estate transaction is a complicated process with various stages of negotiation.  Any delays put the buyer at risk of not performing by the close date, leaving the buyer at the seller’s mercy when asking for an extension of a close date.  Delays can also cause a buyer to lose their loan lock, and perhaps push them to a higher interest rate.

So, shop for your lender and loan program before you start making offers.  Compare, not only, interest rates, but also fees.  A good lender will help you evaluate different packages; does it make financial sense for your situation to buy down the rate?  Is minimizing the down payment a priority, or is keeping the monthly payment low more important?  Is the lender familiar with the market in which you are buying?  What are their strategies for getting the appraisal back in a timely manner?  Where is the underwriting done?   That on line lender may look like a great deal, but if they can’t get the loan closed, and you lose the house, that great deal isn’t so great any more.

I'm glad to answer questions about lenders and the loan process, along with queries about the real estate market in general.

Leslie’s annual real estate report:

Last December I said, “We’ll see more of the same; tight inventory, with not enough houses to satisfy demand, slightly rising interest rates and slightly longer close times to accommodate the new CFPB regulations.” 

Most of this was correct, Inventory remained mostly tight, though I didn’t predict the slight slowing that hit in July. Interest rates did creep up and closing times did lengthen (not so much because of the then new CFPB rules, but due to a shortage of appraisers).

This year, had a variety of markets.  The year started VERY strong, with quickly rising prices and a shortage of inventory driving demand.  Multiple offers, well over list price were the norm.  Buyers grew weary of the scramble, and missing out.  

But by mid-July we saw the market slowing a bit. Aspirational pricing saw many listings sitting, and eventually reduced prices.  The public is often a few months behind active agents with regard to knowledge of the market place.  Sellers were still expecting escalating prices, bidding wars and prices substantially over list price. 

We do still see multiple offers and sale prices well over list price.  It is very hard to predict what listings will attract this attention.  Yes, well priced is essential.  But we’ve seen plenty of very good, well priced houses, sit on the market.  The unpredictability of what is hot and what is not can be frustrating.

And perceptions of market times are interesting.  Even in the hot fast markets, our average market time was around 35 days.  But if a listing sits for more than 10 days, it has the stigma of being overpriced and having something wrong with it.  Only the really, new-to-market properties can have that “on fire” sense.

The big story this year has been about appraisal.  A shortage of real estate appraisers (due in part to steep entry requirements to becoming an appraiser) has slowed our closing times considerably.  Close-in, easy to appraise properties still take up to 60 days, but rural properties, unique properties and properties outside the metro area can easily take up to ninety days to close.  In the short term, we’re increasing the cost of appraisals to entice appraisers to take our specific files.  What used to be in the $500 range is now well over $1000.

Overall, the median sale price (year to date) increased 13.4% to $347,000, region wide.

My crystal ball for 2017 is pretty blurry.  The surprising election of Donald Trump as President, and apparent inconsistent adherence to campaign promises makes prediction challenging.  Trump is a “real estate guy”, but his real estate work is pretty far from older homes in Portland, Oregon.  Downsizing government and easing regulation was a tenet of the campaign.  Loosening Dodd Frank regulations around lending and doing away with the CFPB could open the market to more buyers, but not many.  It also could allow questionable lending instruments back in the market.  The National Association of Realtors conjectured that downsizing could reach as far as Fannie Mae, Freddie Mac and FHA.  Dismantling these programs could have a chilling, if not devastating, effect on the local and national housing markets and economy.  I just can’t see that happening, and doubt that stifling the housing market will be part of “making America great again”. 

In light of the election and subsequent cabinet appointments, I can imagine even more folks from around the country being drawn to Oregon, and Portland, in search of a liberal town, with a strong economy, in a blue state.  So, inventory will remain low, and demand will remain strong.  I’d guess the median sale price won’t rise more than 10%. Interest rates will rise (they already have) as a result of the improved economy, and in part due to the election (interest rates were set to rise, in any case). 

 I do expect, in 2017, the small, expensive, close-in apartments will be over supplied.  Larger apartments, plexes and rental houses will be more popular than ever. 

Pressures on rentals and affordable housing will probably bring some form of rent control to the City of Portland.  This may cool slightly, the avid purchase market for rental properties.  The City of Portland will be instituting a home energy scoring system, much like a miles per gallon for cars, requiring sellers to obtain an energy audit and score before putting a property on the market.  This will start January of 2018. I doubt this will deter anyone from buying or selling, but might slow things down a bit.  In general, homeowners aren’t very price sensitive to energy costs.  So while the data will be informative, I’d be surprised to see much of a change in consumer behavior.

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.

Location, transportation and affordability

The Department of Housing and Development (HUD) has this cool new tool that helps folks look at the relationship of housing and transportation for a specific location.

Since it is thought that transportation is our second largest household expense, it makes sense to consider transportation costs when looking at the affordability of housing.  The website provides a transportation cost calculator and a location affordability index, both of which are customizable to your specific household.

The Location Affordability Portal also has a resources tab with several articles on transportation and housing, along with a few examples or vignettes, showing how the tool provided information to home buyers.

My guess is that choosing one close-in location from another won't show much of a difference.  The information would be valuable when considering rural locations or loner commutes.  Keep in mind, this portal is not about home values in the area in which you are looking, but does use some area specific information about median income.

Portland has focused a lot of resources on public transportation.  I wonder if we spend less on transportation, on average, than other similarly sized cites?  Then again, we aren't as dense as some cities, and our housing cost might more than make up for any transportation savings.

Contact me with any questions you might have about the Portland real estate market.  leslievjones@gmail.com or 503-312-8038.