Prices Coming Back Into Line?

We gave up on our search for an investment property (Owner occupied duplex/triplex) late last year given that nothing "penciled out", and we didn't like the idea of negative cash flow, with or without appreciation. Without appreciation being more likely.

But I still run the numbers on the occassional duplex/triplex to test the market, and I just found one that is actually cash flow positive with 30% down, and only loses $400 a year with 20% down. Here's the ad, and the text from the ad:

"Portland population is projected to grow by 2-4 million over the next few decades. Take advantage of this stable, fast appreciating real estate market. It's still affordable but not for long.

Well maintained triplex in a convenient neighborhood. These units have desirable features that make them easy to rent (last vacancy had half a dozen applications from a single Craigslist ad). All have:

Hardwood Floors
Fireplaces
Air Conditioning
Seperate, Secure Large Storage Units
On Site Laundry
Off Street Parking
Close to Transportation
Convenient to PCC, Warner Pacific, Reed, Downtown

Over $2200 monthly income and rents could easily be raised 10% or more. Great tenants, great building in a nice neighborhood."

Gotta love his optomistic view of population growth, and I'm not sure how he's definign "fast appreciating" unless he's talking about negative appreciation, but this triplex actually appears to be sanely priced.

You will still only earn a 1.5% return on your investment the first year, but hey, at least it's positive!

Nope, we still have a ways to go before the market has truly corrected.

The Tables Turn: Condo Association Forecloses on Bank

There was a great discussion here recently about the dangers of buying a Condo in a complex with multiple foreclosures, as the banks don't often pay the HOA fees.

It seems that one association has gone as far as to foreclose on the lenders!

According to an article in the Daily Business Review:

"Condo associations that are in a financial bind from mounting foreclosures are now targeting lenders who have taken back units from owners in default but are themselves failing to pay their share of maintenance fees.

As more units end up in the hands of lenders, the banks and mortgage servicing companies are responsible for maintenance payments for those units. But administering the growing pool of real estate has proved challenging for lenders.

The Residences at the Bath Club Condominium Association in Miami Beach is pressing a foreclosure action against Wells Fargo as trustee for an investment pool that owns the mortgage on a unit that isn’t paying its maintenance fees. "

These could result in some serious bargains, assuming that prices don't continue to plummet.

Portland Existing Home Prices Continue to Slide in April - Case Shiller

The median price of existing homes in the metro Portland area fell 4.7% year over year in April 2008 according to Case Shiller, continuing the trend that began in July 2007. This is down 6.2% from the peak in July 2007.

The chart above clearly shows the bubble deflating, and also shows a bit of a plateau over the winter as sales slowed and seller's held out that prices would rebound in the spring.


The chart above shows the price index over the past few years. You can see a slight increase in the median price this month (April 2008) which corresponds with the seasonality seen in previous years.
The above chart shows Portland, Seattle, the San Francisco bay area, as well as the 20-city composite index. Portland and Seattle are tracking each other nicely, still about a year behind the rest of the market. The San Francisco area has really fallen off the cliff and continues to plummet.

The final chart shows the price index over the past 8 years. Prices have now fallen back to the May 2006 level, but look to have stabilized temporarily. Unfortunately 2 points don't make a trend, so we'll have to wait and see if prices hold through the summer.

ABOUT CASE SHILLER:
The Case Shiller data focuses on the change in price of existing homes, and tries to exclude the effects of remodeling, or major damage. It tries to exclude investment properties and foreclosures (which would make the data look worse) as well as transfers between family members. It's a much better indicator of how the price of the average or typical house has changed from year to year. For full details on their methodology see their factsheet.

Portland Existing Home Prices Continue to Slide in April

The Case Shiller home price index was released today, and Portland's median price continued to slide in April, dropping 4.7% from April 2007.

The median price was actually up 0.3% from March to April due to seasonality and the peak buying season kicking in.

The 20 city composite dropped 15.3% in April.

Seattle fell 4.9%, keeping track with Portland.

San Francisco is down 22.1% and Phoenix is down 25% year over year.

Full charts and report later today

Reminder - Blog Meetup Tonight

Don't forget, tonight is the first meet-up for the local Portland real estate blogs. Here are the details:

Where: The Lucky Labrador Brew Pub on SE Hawthorne.

When: Friday June 20th at 8pm.

Who: Everybody –even Realtors/agents are welcome to join in the fun. And it will be fun.

Why: Because we’ve talked to each other online and it’s about time we share a cold brew together.

I will be offering my opinions on the local market, live! I know at least one Realtor will be there, and I look forward to hearing other's opinions and engaging in a little healthy debate about where the Portland market is going.

June Open Thread

Don't forget about the blog meet-up coming up in only 10 days! I'm looking forward to meeting all the folks that make running this blog so much fun.

Anybody seen summer? I hear they found it on the east coast. In the meantime, here's an open thread to keep you busy while we all shiver and hibernate in the damp cold.

True Mortgage Calculator

My parents instilled a strong sense of frugality in me from a young age. I like expensive things, I just can't bring myself to pay for them. Hence I've never paid much more than 15% of my gross monthly income towards housing costs.

I've never believed the mortgage industy 28/36% rule, as in my experience this doesn't leave you much money for savings after you've paid 40% of your income to tax, transportation, food, etc.

So we went looking for a 'True Mortgage Calculator" and came across this one:

http://www.truemortgagecalc.com/

It takes into account a few other factors, such as your down payment, other debts, and the 3x income rule (your house should not cost more than 3x your gross annual income).

We just ran the numbers for ourselves and came up with a number right around the budget we're looking at, confirming that we're hopefully not going to spend too much, when we finally do buy.

Cute Bungalow in Need of Finishing Touches - 8907 NE Wygant

8907 NE Wygant, MLS # 8013014

A reader sent in this craigslist ad with the comment:

"More wide angle nonsense. And look at this hell pit! It's only 160K but has it come to the point where we excuse such a slum because it's "only" 160K?"

As usual I love the creative marketing:

"In need of finishing touches".

If a full kitchen and bathroom ceiling are "finishing touches", I'd like to see their definition of a fixer!

"Great investment opportunity, seller has just reduced the price significantly. This house is only $15,000 away from being completed. You could hold this as a rental and cash flow. Your payments could be around 1061.82 (based on 30 year fixed, 6% apr and loan balance of $150,000) and this could rent for more once done. At this price you have many options, you could possibly fix it and sell for a profit (comps out over $200,000)."

If 15k will finish it and make it worth $200k, why aren't they doing it? They'd realize an instant $25k profit. Probably because it needs more like $50k to finish it.

Also note the number of times "could" is used. 4 times? And Oprah could give me a Million Dollars. But I doubt she will. You could make money on this, but I doubt you will.

"Perfect for a savvy first time buyer looking to make some great sweat equity.Those are just a few ideas that you could act on, but first you have to see the place and write an offer. Call to schedule an appointment today before this opportunity is gone."

Savvy first time buyer = sucker.

Last sale was for $137k in May. They need $145 to break even, not counting carrying costs and money invested. Did they run out of money, or get in over their head?

Creative Marketing - 3328 NE 81st Ave

Michelle sent in the following Craigslist ad:

3328 NE 81st Ave

The text of the ad is below. What they conveniently neglect to mention is that they just bought it for $175,500 in May. And in my not-so-humble opinion, the most recent sale price is my best indicator of current value, not a sale from 18 months ago. But it's hard to resist that temptation to think "wow, it's now 25% off!".

"Value:

The house was sold in January 2007 for $270,000.

Appraised at $265,000

Assessed by Zillow: $263,500

Assessed by Cyber homes: $253,100

Bank of America: $258,000

Comparable neighboring houses currently listed for sale (Zillow valuation in parens):

3434 NE 82nd Ave - $250,000 ($248,500)

3148 NE 81st Ave - $220,000 ($213,000)

3234 NE 81st Ave - $239,900 ($245,000)

1135 NE 80th Ave - $269,900 ($260,000)

3118 NE 81st Ave - $228,375 ($237,000)

8030 NE Beech St - $234,900 ($261,500)

4200 NE 81st Ave - $249,900 ($245,000)

3118 NE 81st Ave - $228,375 ($237,000)

Features:

3 bed, 1 bath

1180 SF & 432 SF unfinished basement

Master on main

Large living room with high ceilings

Hardwood throughout

Light and bright

Front porch

Fenced back yard with deck and shed

5,000 SF lot

Newer furnace

Location:

Near bus and shopping. Walk to park and schools. Easy access to I-205 and I-84.

Address: 3328 NE 81 Ave. (not backing to 82 ave.)

House is not a fixer but is being sold as-is.

E-mail or call 360 604-0613 for info or showing. Click on photo below for pictures.

We'll be working at the house all weekend - please feel free to knock if you drive by and would like to see the inside."

Price Declines Hold Steady for May - RMLS

The May RMLS data was released last week (yeah, I know I'm late to the party, it's been a busy week and I certainly wan't spending Father's day weekend inside on the PC instead of playing with my daughter!)

The median price in May 2008 was 287,500, down 3.2% from last year, but up 5% from April's median price of $275,000.

I'll post more once I get more info from my source. I could use a second source if anyone has access to RMLS data that they'd like to share.

Bad Marketing of the Week

I've seen some great marketing, some average marketing, and some downright poor marketing in our house search. But this one takes the cake.

RMLS# 8052139

No Photo.

The description in it's entirety: "Spacious duplex"

Makes me want to run right out and see it!

Courtesy of "New Start Real Estate LLC" which doesn't even show up on Google. Anybody know anything about them? Discount brokers? FSBO? Masters of brevity?

- edit -

Looks like Ellie added a photo, taken from inside her car! Come on, show a little effort!

A Stuning Remodel! 720 N Holland St.

This one actually made me laugh out loud. Good thing I wasn't drinking coffee! They're asking $350k for this gem.

Check out the stunning, vintage wood paneling? Looks like someone threw a new coat of varnish on it! And I gotta assume there are wood floors under the new carpet, they must be in horrible shape as they're not even mentioned.


And yet another example of Home Depot's finest cabinets.

Did they run out of money fixing the roof?

Definitely a re-muddle. Sigh.

Oregon Foreclosures Up 121% in April

In yet another sign that it's only getting worse, Realty Trac released it's April report which showed foreclosures in Oregon up 121% from April 2007. That's one for every 975 households.

The one bright spot is that the numbers were flat from last month.

I imagine it will get worse before it gets better, with more and more ARM's resetting. I saw a pre-foreclosure yesterday that was valued at $329k, but the owners owe more than $450k on it. The bank will end up owning it and taking a bath.

Another Condo Glut Estimate

The Tribune has a piece on the local condo market, "Who’s paying for the condo craze?". Here's an excerpt:

"During the past few years the city has committed hundreds of millions – $300 million in South Waterfront alone – to encouraging various condo developments around town. The idea, of course, was that this money would be paid back from taxes on the condos.

So what’s going to happen now that the condos aren’t selling?

As should come as a comfort to no one, there is a considerable difference of opinion on that score.

Two months ago, The Oregonian ran a news story on the downturn in the condo market saying there are about 1,300 condos on the market. As they saw it, however, that wasn’t going to be a problem because if condos continued to sell at a rate of 800 a year, the backlog would be erased in 18 months or so.

This week, the Portland Business Journal upped the unsold condo figure to 2,500. Even then, the article went on to predict, there could be a “condo shortage” in two or three years.

The current issue of Brainstorm Northwest, a conservative business magazine, places the figure at closer to 7,500 and says that the backlog of unsold condos might well last a decade.

P-town, we’ve got a problem."

Ya think?

Portland Real Estate Outsiders / Housing Blog Meetup

We should probably leave well enough alone, but Clint (Portland Housing Blog) and I decided it's time to meet some of the cast of characters in person.

Here are the details:

Where: The Lucky Labrador Brew Pub on SE Hawthorne.

When: Friday June 20th at 8pm.

Who: Everybody –even Realtors/agents are welcome to join in the fun. And it will be fun.

Why: Because we’ve talked to each other for over a year (a little less here) and it’s about time we share a cold brew together.

The date and location are open to discussion; if a bunch of people can’t meet on a Friday night then we can adjust.

Paper bags with eye-holes will be provided for those wishing to remain anonymous.

Are you planning to attend? Let us know in the comments…

Reader Sightings – 2815 NE 57th Ave

Jamie found this gem while searching recent RMLS listings. It's currently bank-owned and they're blowing it out the door for 20% less than the amount for which they bought it back.

2815 NE 57TH AVE, MLS# 8038680

Here's the recent sale history:

08/16/2007	Bank reposession		$400,000.00
01/13/2006	Sale (remuddled?)		$485,000.00
08/18/2005	Sale		$222,500.00
09/18/2002	Sale		$159,900.00

Judging by the photos it was remodeled within an inch of it's life before the sale in Jan 2006. I swear any character this house had was restored right out. Who needs that pesky wood trim, and those hard to clean hardwood floors?!? Let's put in nice beige carpet and the finest Home Depot cabinets!

At only $155 per square foot it didn't seem like a horrible deal at $485k, but somehow that still seems way overpriced to me.