Portland insiders see signs of improvement?

The O has a story yesterday covering the recent luncheon on the local real estate market that was attended by 16 local brokers. "Portland real estate insiders see signs of market improvement"

Thanks to Ryan for asking one of the 10 or so questions I sent in. Here are a few of my favorite comments.

"At a housing industry lunch forum, the brokers said they started noticing fewer potential buyers visiting their listings about last April.

The evidence that the bottom is near?

Brokers point to the fact sellers are finally willing to give up a bit on their price to sell faster. They also point out that real estate insiders themselves are now snapping up investment properties."

Really? They're snapping up investment properties? Show me one. Nothing concrete was mentioned in the article.

Nothing I analyzed last year (2-4 unit buildings) made a positive cash flow with 20% down, most would need 40% down, and then you're looking at a 1% return on your investment. Unless you include speculation on price inflation, but that looks to be over. So I predict prices will have to soften to come back in line where investment properties actually provide a decent ROI and cash flow without hoping for 10% YoY appreciation.

But let's look at a concrete example. Here's a four plex for sale for $415k. With a 44% down payment ($182k) you're looking at a 0.06% cash on cash return. That's not 6%, that 0.06%!

I know interest rates are in the proverbial toilet, but even my savings account pays more than that.

If there are good deals out there, this outsider hasn't found them. You must need to be an insider.

Here's one of the questions I submitted to Frank:

"Why are Realtors afraid to admit the market is softening and will likely decline over the next few months?

"It has," one broker said.

"It's all past tense," another said.

"It has declined," Davies said. "It has softened. But actually the last 60, 90 days have been just like they were last year. It's very active."

Becky Jackson at Realty Trust Group Inc. in the Pearl District said: "When you're speaking to a buyer today you may not be able to say perfectly that it has passed. You might still see something for the next few months but you're not going to know what is the last day of the low market."

Just like they were last year? Sales are down 30% from last year, that's "just like last year?"

It's all past tense? Wishful thinking again. It's all future tense! The decline has just started here.

"Kathy MacNaughton of Realty Trust Group said: "What you say privately and publicly is different."

"How so?" I asked.

"I don't think it does you any good to say the market is tanking. And it's not. We know that. You've heard that today. But I will tell you that probably six months ago I talked to my buyers privately and said, 'You know what, we have to be very careful. I see signs in this market of settling.' And I think all of us did the same thing.""

Prices might not have tanked, but I would say that a 30% decline in sales is pretty much tanking. I know in my industry if we were down 30% from last year I, and 75% of my coworkers, would be out of a job. And if I told my manager that a 30% sales decline was just like last year I'd be fired on the spot.