Wednesday, July 30, 2008

632 NE Russell - Now $475k and Bank Owned

It looks like the owners lost their foreclosure battle, and 632 NE Russell - the house that inspired the great "is it IN Irvington, or looking in on Irvington" debate - is now bank owned. And $75k or 14% cheaper. That's $145k instant equity for those keeping track.

For $475k I'd still like a garage or two. But I'm just picky.

RMLS# 8060441

EDIT: We drove by a while back and this is teh view across the street. Think this might be one reason why it's not selling?

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Portland Exisitng Home Prices Plateau - Case Shiller

The median price of existing homes in the metro Portland area fell 5.2% year over year in May 2008 according to Case Shiller, continuing the trend that began in July 2007. This is down 5.9% from the peak in July 2007.

The chart above clearly shows that 1. there was a bubble in Portland, and 2. it is now deflating. The chart 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. Have I mentioned I like charts?

We're also seeing a bit of a plateau right now as peak buying season is in effect. This is seasonal so don't expect it to continue rising all year.
The chart above shows the price index over the past few years. You can see a slight increase in the median price the past two months which corresponds with the seasonality seen in previous years.The above chart shows Portland, Seattle, the San Francisco bay area (the other areas I consider as closest to Portland) 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 through the summer buying season.

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.

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Extreme Makeover = Extreme Stupidity

It's the classic American fairly tale for the new millennium!

A family is down on their luck.

A stupid TV show gives them more than they could ever hope for to solve their relatively minor problem.

The couple squanders their luck and ends up right back where they started, pissing off all the people that helped them in the first place.

Here's the scoop. Extreme Makeover Home Edition gave the Harper's a new house worth $450k, $200k worth of additional furnishings, scholarships, and additional winnings. But apparently not the wisdom not to blow it all.

The house is now in foreclosure, as it was used as collateral for a $450k home equity loan used to fund a new construction business that is likely now failing.

That must have been one hell of a new business to need $450k in startup capital right away. And given the current housing market I can only imagine that even if they were successful, business has likely ground to a halt recently.

I guess I shouldn't be surprised. Americans don't want to take responsibility for our own actions and poor decisions. We want to win the lotto, or hit the reset button and make our stupid decisions go away like a bad video game. This show and others play into that. We all look on and say "boy I wish that would happen to me" instead of going out, working hard, and earning our success.

I guess it doesn't make for good TV to go in and help a couple solve their simple problem, and in the process teach them how to solve the next on their own. Teach them to fish, instead of giving them a fish, then letting them hock the fish to buy a bigger fish.

Here's the full text from Access Atlanta is quoted below, because frankly Lack-of-Access Atlanta is the only online newspaper that's worse than the Oregonian in terms of draconian registration restrictions.

Things couldn't look better three years ago for Milton and Patricia Harper of Lake City, who giddily accepted the keys to a small castle, plus enough money to pay taxes on it for 25 years. It was a product of "Extreme Makeover: Home Edition."

Now, the Clayton County house is a two-story, turreted example of how things can go wrong. It's in foreclosure.

The Harpers used the house at 5489 Ahyoka Drive as collateral for a $450,000 loan, Clayton County mortgage records show. Records at the law firm handling foreclosures for the lender, JPMorgan Chase Bank, say it is in foreclosure. The four-bedroom house with decorative rock walls and a three-car garage is scheduled for auction on the Clayton County Courthouse steps Aug. 5.

The Harpers, who declined interview requests when reporters knocked on their door Friday, told WSB-TV they got the loan for a construction business that failed.

Failure seemed an impossibility in February 2005, when ABC TV viewers got a look at the stunning home constructed in a subdivision three miles east of I-75. Painted dark olive and covered with specialty shingles, the home's domed door opened into a structure that featured four fireplaces, a solarium, music room and a porte-cochere that connected to Milton Harper's new office. The yard was a study in landscape art, with young magnolias, fieldstone and a Leyland cypress hugging one corner. A black metal fence ringed it.

It had taken shape in six intense days in January 2005, when Atlanta-based Beazer Homes USA and "Extreme Makeover" demolished the Harpers' old home, plagued by a faulty septic system. Professionals and volunteers came together to erect the largest home that the "Extreme" team had ever built.

Materials and labor were donated, but the home would have cost about $450,000 to construct. When they were done, the home dwarfed all the ranch and split-level structures in neighboring lots.

That was not all. Beazer Homes' employees and company partners raised a quarter-million dollars in contributions for the family. The sum included scholarships for the three Harper children and a home maintenance fund.

The Harpers, whom ABC chose from among 15,000 "Extreme Makeover" applicants, spent the week in Disneyland while 1,800 people swarmed about the site. The family returned to a new home, plus contributions worth about $200,000.

They opened the home to lots of friends, said Amber May, 18, who lives a few doors away from the Harpers.

"It will be midnight," she said, "and we'll see six cars and a million kids" at the house.

Another neighbor, Brittney Harris, said the Harpers seemed considerate.

"They're good, quiet neighbors," she said.

Perhaps they are, said Donald Williams, who was visiting Harris. But he doubted their business acumen.

With $450,000 "they could have just bought a business," he said.

A representative for Beazer declined comment. A representative of ABC offered an e-mail: "'Extreme Makeover: Home Edition' advises each family to consult a financial planner after they receive their new home. Ultimately, financial matters are personal, and we work to respect the privacy of the families."

Law firm McCalla Raymer LLC, which has a team of specialists handling JPMorgan foreclosures, confirmed that the Harper home is on the calendar for auction next month.

The news left Lake City Mayor Willie Oswalt wondering what went wrong. He recalled a chilly January day when he and a handful of others wrestled an aged beam into place in the home's living room. The Harpers' future seemed just as solid, he said.

"It's aggravating," said Oswalt. "It just makes you mad. You do that much work, and they just squander it."

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Tuesday, July 29, 2008

Damn That's a Nice Door

This condo (RMLS# 8075567) is being listed with only one photo... of the front door.

It's a nice door, not too flashy. The numbers are a bit big for my taste, and I'm not big into black doors. But it's ok.

Seriously, can't you lead with a better photo? You only get one chance at a first impression, and this one ain't great.

Portland Existing Home Prices Drop 5.2% in May - Case Shiller

The Case Shiller data was released this morning, and the median price for existing Portland homes fell 5.2% in May from May 2007.

The peak price was in July 2007.

Thursday, July 24, 2008

What Happened to PMI?

When I bought my first house back in 1995, I couldn't scrape up a full 20% down payment and still afford the city I wanted to be in. So I only put down 10% and paid PMI, like most people did. Even with PMI I was still paying 20-30-% less monthly than it would cost to rent the same house, so I felt comfortable about the decision not to wait and save more towards the down payment.

Fast forward to today and I'm wondering what happened to PMI in the age of the zero-down, negative amortization mortgage. Here's an interesting piece on why it went away:

If you don’t live in a cave, you have probably hears about the current crisis in banking and housing. Many banks and mortgage companies have already failed (Netbank, Indymac, and others), and many more are expected to follow. But if the banks hedged their risks appropriately, the pain of the housing crisis would be mostly limited to the private mortgage insurance companies, such as MGIC Investment Corp (MTG).

Traditional wisdom states that you need a 20 percent down payment to purchase a house. The 20 percent down payment is the method a borrower can use to prove loan worthiness. The large down payment, and a good credit score were the traditional means a bank used to establish credit worthiness for such a large purchase. If a borrower wanted a home loan with less then a 20 percent down payment, they were structured as a piggyback loan. The piggyback loan consisted of two loans, one for 80 percent of the value of the house, and a second loan at a higher interest rate for the difference between the smaller down payment (sometimes nothing at all), and 20 percent. In addition, banks and mortgage lenders issuing piggyback loans required the owner to purchase additional private mortgage insurance. The mortgage insurance premiums paid by the owner was a protective insurance policy designed to hedge the banks risk against default. Companies such as MGIC, who sold the mortgage insurance, would cover the first 20 percent of loss and the banks would cover the rest.

Looking in on the carnage now, I bet most of the folks that are walking away or losing their houses as rates reset could have rented the same place for less than their mortgage payment. That should have been a sign that prices were out of whack. I know we rent our current place for less than the monthly PITI.

Wednesday, July 23, 2008

Watch out for that falling price! 3014 SW Iowa St.

This interesting little house (3014 SW Iowa St, RMLS #8039912) is now on the market for $255k, down from $335k. Why they didn't just go to $250k and catch the folks who are searching up to $250k is beyond me. But hey, if they had to drop the price 24%, they might not be so good at this whole pricing thing to begin with.

I also find it interesting that it's not a featured property on the listing agent's site. Are they embarrassed by it?

Monday, July 21, 2008

Where are the Desperate Sellers?

Here's a group of Realtors that know how to market themselves to match the current market conditions.


What's their angle? They track homes that have been on the market for more than 100 days, and are marked down more than 7%.

Check out their database here. They have multiple databases, broken out by local areas.

It's a great angle, they're really just repackaging data that already exists to find a niche that many buyer's currently want, deals.

And one more quick marketing tip to other Realtors and agents out there. Contrary to popular belief the best strategy in a down market is to get more targeted, not less. Find the key customer that you're after and market to them and only them.

Don't have a core customer? They you also likely don't have a differentiation, and you will struggle in this market. Figure out your strengths and target your marketing efforts towards them.

Thursday, July 17, 2008

It's Lovely! I'll Take It!

Someone had the brilliant idea to compile bad realtor photos into a single blog, much like some of the individual posts that have popped up here.

The site is called "It's Lovely! I'll Take It!" and is worth a look.

As always, keep sending local versions to me and I'll post them here, such as these posted in the comments of a previous entry.
Seriously, if this is the best your Realtor can do, either hire a professional photographer, or fire them and hire a new Realtor. There are lots of good ones out there looking for work, there's no excuse for putting up with this.

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Foreclosures in the Portland area and central Oregon top 2002's dot-com drop

Ryan Frank has an interesting look at Foreclosure's in today's Oregonian:

Anyone who has been reading this blog knows that while foreclosure's here aren't YET as bad as some other areas, they are accelerating quickly. But this is an interesting comparison to the last recession.

Mortgage defaults in the Portland area and central Oregon rose 97 percent in the first half of 2008, compared with a year ago.

That's not too surprising considering homeowners in 2007 still enjoyed the tail end of the housing boom, and the housing market is now in full swoon.

What's more surprising is the number of defaults -- typically the first step of a foreclosure -- through June 30 rose far higher than at the peak of the last downturn in 2002, according to records in Multnomah, Washington, Clackamas and Deschutes counties. Those cover the Portland area and the peak-growth Bend region.

Roger Erickson sums it up:

"We're just seeing the tip of the iceberg," said Roger Erickson, a principal broker at Americana Properties Inc. "It's going to get a lot worse before it gets better."

Lenders hire Erickson to sell properties they've taken back from borrowers in foreclosures.

Erickson said he had five foreclosures to sell in early 2008.

Today, he has 22.

Tuesday, July 15, 2008

Portland Median Price down 2% in April - RMLS

The June RMLS report was released today, and it shows a 2% decline from $295k in June 2007, to $289k in June 2008.

Months of inventory are at 9.5 months, almost double the 5.0 months for June 2007, and 4 times the 2.6 months during the peak of the bubble in June 2006.

Closed sales are down 31.3% from June 2007, and pending sales are also down 30%. New listings are only down 16.3% year over year, which to me means that people have figured out that they should only list their house if they absolutely need to sell it.

I still don't see signs of a bottom, but hang on, the ride will only get bumpier what with the Fannie Mae / Freddie Mac issues now coming to light.

Months of inventory are still high at 9.5 months.

Friday, July 11, 2008

Foreclosures up 129% in Oregon in June '08

RealtyTrac released their June report today, and things continue to get worse for Oregon.

Total foreclosure filings totaled 2047 in June 2008, up 133% from the 880 filings in June 2007.

Notice of default (NOD) were up 73% from 541 in June '07 to 938 in June '08.

Notice to sell (NTS) are up 215% from 303 in June '07 to 953 in June '08.

Finally, bank owned properties (REO) are up 333% from 36 in June '07 to 156 in June '08.
My take on this data is that as financing has become harder to find and prices have started to decline, more and more owner's are unable to sell or renegotiate their loans are the houses are going to auction.

Bank owned properties are increasing significantly due to the increase in houses going to auctions, and the lack of credit for the usual players who typically buy the houses at auction. Other sources have told of houses at auction bringing no bids, either due to lack of capital for buyers, or a belief that the houses are overpriced.

For those buyer's who are interested in buying a foreclosure, this article "How to buy a foreclosed home" in the San Francisco Chronicle is one of the best descriptions I have seen recently about the pitfalls and traps of trying to buy a house in any stage of foreclosure:
As bank repossessions continue to mount, it's a question that is being asked more and more often. The answer is, foreclosures are available and reasonably priced - but don't expect a screaming deal.

"More than 50 percent of our customers come in wanting a great deal on a foreclosure," said Pat Lashinsky, CEO of Emeryville's ZipRealty, a brokerage with more than 2,200 agents in 19 states. "The percentage that actually do (find one) is significantly less. When you find a good deal, there are five or six or seven offers, and you're up against professional investors."

Finding a foreclosure is straightforward, according to a range of industry
experts: Decide on a budget and geographic area; get prequalified for a mortgage; work with a buyer's agent; check the MLS - the same steps you take in buying a nonforeclosed property.

But there are potential obstacles in navigating the unfamiliar territory of the properties known in the trade as REOs - short for real estate owned by banks. "It takes a certain breed of borrower to buy a foreclosure," said Joe Metz, a Realtor-broker with Re/Max Active Realty in Fremont. "I hold a lot of REOs open on weekends. I can tell if a buyer is new to the whole thing; they just get really upset with the condition of the house."

That's because banks don't do more than a very basic clean-out of foreclosed properties. They don't paint. They don't replace carpets. They don't remodel.

"We explain that if you want a staged house, you'll pay 50 grand more for it," Metz said. "This is a deal. These are all things that can be corrected with your checkbook."

Here are more factors to consider in buying a foreclosure:
-- They're discounted, but not giveaways. Banks usually determine an asking price after hiring several real estate agents to give opinions about a property's value.

"Banks are getting very aggressive on pricing," said Glen Bell, a Realtor with Keller Williams Realty. "We're seeing them priced at 10 percent to 15 percent less than non-REO properties. Reducing prices to attractive levels has become their strategy ... to unload assets."

However, it's important to remember that banks, and the people who work for them, are skilled at analyzing prices and market conditions.

"Our experience is the bank has a number (the asking price); they will hold that for a while," Metz said. "If they don't get that number for three or four weeks, they will lower the price a little more. Banks are very smart about how they do this. They move them very quickly and for about as much as anybody could get."

-- They can draw multiple offers. Don't think that you're the only one with the brilliant idea to buy a foreclosure at a discount. "We've seen multiple offers in about half of our sales and pending transactions," Bell said.
Anybody have any brushes with foreclosure's they'd like to share?

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Wednesday, July 9, 2008

Lender Implode-O-Meter

I just stumbled across the Mortgage Lender Implode-o-Meter which tracks the implosion of mortgage lenders, much like F@cked Company tracked the implosion of the dot-bombs.

I have poked through the site a bit and it's a throwback to the stories i witnessed (first hand unfortunately) from the early part of the decade.

Tuesday, July 8, 2008

A Real Concordia Fixer - 5421 NE 25th Ave

Here's a diamond in the rough for the handy and brave. It's only going for $129k in an area where similar homes are easily going for $250k and up, although it might need $100k to get it in similar condition. And unfortunately it sounds so bad that you won't get bank financing. Which is a shame as it excludes those that need this place the most.

It last sold for $45k (anybody know what SH stands for on the last sale/transfer?) and someone has at least pulled permits to do some remodeling. Maybe they ran out of money, who knows. But they still stand to make a profit.

The listing also lists Sabin elementary, when this is a stone's throw from Vernon. Where does this info come from?

Thursday, July 3, 2008

Flipping Still Alive and Well - 3311 NE Tillamook

I thought most of the flippers had seen the gravy train coming to an end, or were having trouble finding financing, but I was wrong.

We watched this house go on the market late last year at $499k, then sell for $460k. Work started immediately, stripping all the old paint, putting up a new fence, and obviously more.

We've always liked the house, but it's right on 33rd, so not the greatest location.

Now that we can see the interior it has the typical stunning woodwork, the new paint is a huge improvement over the old, but the kitchen floor screams "Home Depot" to me.

It's now back on the market for $849k (whoops, already marked down to 799k)! At the previous sale price (Trulia still shows the before view) of $460k it sold for $240 /sq ft (finished), and at the new price, including the finished basement (I'm not including the attic as it looks to be about 4 ft hight) it's up to $305/ sq ft.

I'll place my bet and predict it's going to be on the market for at least 6 months, and will sell for less than $700k (at $700k it's priced at $267 / sq ft). Anyone else care to make a prediction?

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Happy Independence Day!

If you've been wondering why it's been quiet here this week, I've been on a long-verdue vacation, enjoying time with the family and a friend who's in town. I hope everybody out there has a fantastic long-weekend, and remember to play safe.

As always, if you see any houses that deserve a mention on the blog, send me an email.

Happy Independence Day!


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