Portland housing affordability and interest rates.

 Yes, interest rates for residential mortgages are nudging up.  We're seeing rates on FHA, conventional and  jumbo loans above three percent.  Don't get me wrong, a rate of 3.25% or so, is a GREAT rate.  Just not if all your friends got rates at 2.65%.  Most home owners either got a good rate when they bought, or refinanced during these several years of low rates, leaving rate increases to effect folks currently or planning on buying.  Here's a chart showing how rising interest rates can effect monthly payments, or buying power. 

As interest rates go up, buyers can afford less of a house payment.  This shrinks the number of buyers who can afford any particular house, thus decreasing competition on any given listing.  For the past few months, sellers have seen less competition on their listings. 

Due to be updated any day now, the quarterly affordability index was already on the move in June.  Affordability is calculated according to a formula from the National Association of REALTORS®. The formula assumes that the buyer has a 20% down payment and a 30 year fixed rate determined by Freddie Mac. In the month of June 2021, a family earning the median income ($96,909 in 2021, per HUD) can afford 103% of a monthly mortgage payment on a median priced home ($521,000 in June).  

You can see back in the Great Recession, 2007, affordability was quite low, with households not able to afford even 85% of the monthly mortgage. Then, coming out of the recession, in 2011-2012, affordability peaked.  

We do expect to see some wage growth, which may increase affordability.  Though wage growth will need to outpace the rise in interest rates and prices, to have any effect on affordability.  Stay tuned as I'll post the updated affordability index when it is released. 

If you have questions about the real estate market, especially your particular situation, call, text or email.  leslievjones@gmail.com 503-312-8038  

Some cool tools

There are a variety of ways to look at real estate values, and changing real estate markets. 

The general public uses Zillow a lot for this purpose.  Zillow is about big data, and uses a variety of data feeds to arrive at a value.  I track what Zillow says as compared to actual sale prices of transactions in which I am involved.  Sometimes Zillow is spot on, and some times Zillow is in left field. 

Realtors have a similar tool which provides an automated home valuation.  The system, allows us to customize the valuation by adding information specific to the subject property. We also use our Multiple Listing Service and a variety of programs to arrive at home values.

As many real estate websites do, mine has a pricing calculator .  Click the "sell" tab and enter your address.  It will give you both the Zillow and SmartZip value estimations. 

In a quickly changing market, pricing is tricky.  No doubt.

The FHFA (Federal Housing Finance Agency) tool helps get at value a different way.  It looks at the Metropolitan Statistical Area (MSA's),  the quarter in which the property was purchased and quarter in which one is looking for a value.  It projects what a given house purchased at a point in time would be worth if it appreciated at the average appreciation rate of all homes in the area.  This isn't the end all, be all of pricing.  But I do find it to be a good data point in a pricing strategy.  

Play around with the FHFA Home Pricing Calculator.   What do you think? Does it seem to reflect reality?

The Federal Housing Finance Agency website has a variety of other tools and data.  I also like the Four Quarter Appreciation Map. Holy Cow, look at Austin, TX with 35.1% appreciation over the previous 4 quarters,  and Boise, ID at 41.1%.  Makes the Portland metro area's 18.3% four quarter appreciation look downright reasonable!

If you want a more accurate value estimation, give me a call, text or email. I'd be glad to come by and work up a market analysis. leslievjones@gmail.com  503-312-8038   

Street of (differing) Dreams

I had the occasion to visit the 2021 NW Natural Gas Street of Dreams a few weeks ago(the 2020 Street of Dreams was cancelled due to COVID).  I don't always go, but our company was a sponsor and we held an agent appreciation event there.  This year's show was in Happy Valley. It featured three homes at the main site, a container home and sleeping pod, and more affordable homes at a second site.

The Street of Dreams showcases trends in floor plans, features and interior design in the housing industry. The houses are usually quite large; largest this year was 7338 sq ft. Zion  (Heritage Crest 3).  I was drawn to the 3834 sq ft Ohana (Heritage Crest 2).  Both were built by Red Hills Construction.  Hygge, Heritage Crest 1, was built by Anlon Custom Homes.

As you might imagine all the homes had very generous outdoor "rooms" and spaces for outdoor entertaining (a nod to COVID?).  I'm always on the look out for the quirky feature.  This year's: jets to dry the shower after use.  I suppose this makes cleaning easier.  Back in the 1976 (before my time in real estate) they featured...built-in microwaves.  Cutting edge.

I was especially interested in the container home and sleeping pods. The Home Builders Foundation partnered with MODS PDX and Base Design Architecture on this project, showcasing affordable and energy efficient design options for addressing houselessness.  These particular units will be donated to one of the Home Builders Foundations' affiliate affordable housing partners. It would sure be great to see these designs in housing solutions around the metro area.

The Street of Dreams predecessor was the Parade of Homes, which started in 1937 and featured homes on N Michigan in Portland's Piedmont neighborhood.

Photo courtesy of the Portland Historical Society

Coincidentally, one of these homes is currently on the market with a colleague.  6106 N Michigan is a 2613 sq ft, 5 bedroom, 2 bath home , listed for $750,000. The house features original period details, hardwood floors, coved ceilings, gas fireplace insert, leaded glass windows. Kitchen w/butcher block counters & nook. Like the current Street of Dreams houses, this house also has a covered outdoor "room".

Today is the last day of the 2021 NW Natural Gas Street of Dreams. Online tickets may be in short supply.  Keep an eye out for the container home and sleeping pods to make an appearance. If y0u're waning more information on 6106 N Michigan, contact me, or the listing agent, Jamie Orr at jamieorr@remax.net.

What Seasonal Slowing Looks Like

 The Portland real estate market has been crazy for the past year. After the initial COVID shutdown, it roared back with a vengeance. There was no normal, seasonal slow down in the summer, and we sped through civil unrest, wildfires and smoke, the winter holidays, an unconventional  election, assault on the capitol, snow, ice and widespread power outages.

Our active real estate market has had many components; high demand, low supply and low interest rates.  This resulted in very short market times, multiple offers well over list price (when the list price was priced to recent comparable sales), as-is sales, cash sales, buyers paying the difference between the high sale price and an appraisal at market value, sellers getting up to 60 days possession of their house after closing (at no cost), buyers releasing earnest money to sellers in advance of closing and so on. 

We still have much of that going on.  But we are seeing a sliver of what I think is seasonal slowing.  This is not a "crash". It's an easing in the rate of price increases. It's fewer multiple offers, and not as high over list price. We see some properties stay on the market for a few weeks.  Some buyers are getting the opportunity for inspections.  Heck, some are even getting concessions from sellers in inspection negotiations.  

Real estate agents are breathing a sigh of relief as the pressure cooker we've been in lets off a bit of steam.  Unless of course,  there is a seller expecting the conditions of a few months ago, which may or may not occur for their particular property.  

With a slight shift, comes the education piece (like this 😊). Buyers who tired of getting beat up and out, may want to come back in the market about now.  Sellers afraid to sell their home as they might not be able to find a new home, might be able to get an offer accepted contingent on the sale of their current home.  And sellers expecting the highest and craziest competition for their listing, may need to revisit those expectations.

Our multiple listing service releases monthly statistics around the 10th of the month. So in July, we'll see the June numbers.  In advance of that, I look at the number of properties coming on the market as compared to the number going under contract (absorption). I look at the market time for properties currently on the market as compared to the market time for those under contract, or recently sold.  These are a few of the ways we can get sense of what is happening in the short term.

We are, after all, cramming two summers into one.  Some have backlogs of unused vacation from 2020, and face a "use it or lose it" policy. Many are taking this opportunity to see family they've missed in the past year +.  Family reunions, weddings and other get togethers are back on the table. No wonder things aren't as frenzied.

If you've got questions about your particular neighborhood, house or situation, get in touch. I love talking about real estate.

Remember that home inspection?

Many of you, who own your own homes, most likely had a home inspection done at the time of your purchase. Quite possibly, information from the inspection was used to negotiate seller repairs or seller credits.  And then, you filed it away somewhere, or not. 

That inspection had all sorts of valuable information; how many amps are in your electric panel, how old is that hot water heater?  There are also home maintenance tips, suggestions of conditions to keep your eye on, and often repair/scope of work suggestions.

I know, I know.  Life gets so busy when you buy a house.  Once the dust settles from your move, digging up that inspection just isn't a priority.

Until...you're getting ready to sell, and your real estate agent asks if you tended to those inspection items.  You might even have gotten a seller credit for a repair you planned to handle once you owned the house.  And quite possibly,  didn't use that money for the intended repair.  You are not alone

Don is currently doing some repair work to the south side of our house. That side is exposed to lots of sun and rain, with not much eave over hang for protection.  Caulking around the window trim perhaps wasn't kept up as well as it might have been 😬. We're lucky to have avoided moisture intrusion into the walls, due to decent flashing, making this job a bit easier. 

Home repair issues rarely fix themselves, or improve with age.  As the saying goes, prevention is the best medicine. 

For many of us, our home is our biggest financial asset, plus...it's home.  Give it a bit of love. Dig out that old inspection, or, if I assisted you in your purchase, get in touch.  I probably have it in my file somewhere.   If you need referrals for tradespeople, I'm glad to send a few along.  Contractors are busy these days and construction materials are crazy expensive, so stand forewarned. 

What is it about "soft-close drawers"?

 I've noticed of late, there is one feature almost every buyer looks for, or tests in a house.  The kitchen drawers.  Soft-close drawers.  I'm not saying they don't care about other features.  But this one feature is consistently looked at; no matter the price or age of the house, no matter the demographics of the buyers.

Is it a proxy for other features of the house? If they have soft-close drawers does it also mean the house has heated bathroom floor, air conditioning, or a high efficiency furnace?  

Or are folks truly focused on just the soft-close drawer; the ease and lack of sound they offer?  Are they really that great? I don't have soft-close drawers, so perhaps have not yet been indoctrinated.

From a more utilitarian view, there are other things I see in a house, that often reveal more about the house.  If the house is a recent fix and flip, but is lacking the required smoke and carbon monoxide detectors, or seismic straps on the hot water heater, I can't help but wonder what else was neglected.  Similarly, during a home inspection, a horribly dirty furnace filter can indicate an overall lack of attention to maintenance. 

In valuing a house, I'll admit I don't factor soft-close drawers into pricing.  But I do think their presence makes buyers more apt to offer higher on a house. Who knew?

Is there a feature or a component of a house that provides deeper insight for you?

And in case you are thinking about adding soft-close drawers?  Here's a video from the folks at Rockler. 

Update on Portland's Residential Infill Plan - RIP

                                    Residential Infill Map

 The Residential Infill Plan has been several years in they making.  The overall plan was adopted by City Council in 2020, with refinements and rule making ongoing.  A few elements of the plan were put in place in 2020, with the remainder of the plan taking effect on August 1, 2021.

Depending on the type of project one is working on, some are rushing to submit for permits before August 1st for approval under the current rules.  Some are holding off until after August 1, to take advantage of benefits of RIP.

The overall plan is quite complicated (as planning in Portland tends to be).  The plan has some re-zoning, some new overlay zones, limitations on building size and more options for increased density.  The plan, as you might imagine, has been quite controversial.  From what I can tell, it limits large houses, allows for higher density, especially for affordable housing, and has a focus on neighborhood livability.  

The size limitation is certainly one of the more controversial elements.  The plan uses different floor area ratios or limitations (FAR), depending on the type of housing being built.  For example, in a R5 (one unit per 5000 sq ft) zone, a single family home would have a FAR of 0.5. Meaning the above ground floor area of a single family home would be restricted to 2500 sq ft.  Keep in mind, this is not the foot print of the house, but the total sq ft above ground.  In the same zone, if one were building a duplex, the FAR would be 0.6, allowing for a total of  3000 sq ft in the two dwellings.  And for a triplex, the FAR will be 0.7, or a total 3500 sq ft in the three dwellings.  And, a single family home would not be allowed on a double lot.

For neighborhood livability and cosmetic considerations, the city will look for front doors to be positioned closer to the ground and will allow larger/deeper eaves extending into the set-backs.  Most parking requirements are also being eliminated.

If a project contains three or more units, one will be required to be "visitable" by folks with mobility challenges.  Think of it as ADA lite.  One unit will be required to have a zero step entry, and to have a restroom and living space on the ground floor.  This isn't full on ADA, but an effort to make more of our housing welcoming to those with mobility challenges.

With increased density, there is a concern about our tree canopy.  That is, will there be enough room on lots, to accommodate a vital tree canopy into the future?

As with many plans and initiatives in Portland, some think the City is over reaching, and others believe they haven't gone far enough.  With the RIP, some think the allowance of developing additional dwellings on residential lots is giving "the developers" a gift.  Builders and developers I have spoken with see the 2500 above ground square footage limitation as a real hinderance to their business model.  

What do you think?