home values and prices

Dec 19 2016

Made your resolutions for 2017? 5 reasons to trade in your home for a better one in the new year

Most people probably think of the decision to sell their home as a highly personal one. And of course, it is. But if you can choose the timing, it’s wise to look at your personal circumstances and beyond. Here are 5 reasons why early 2017 could be the right time to sell in the Portland market.

Your home is no longer a good fit with your needs and wants
You have significant equity in your home
Portland continues to be a lopsided seller’s market
Portland is expected to remain near the front of the national pack in home price gains next year and mortgage interest rates may rise
There are real advantages to selling in winter rather than waiting for spring

1. Your home is no longer a good fit with your needs and wants

It may be time to move if you’re facing a growing or shrinking family, a promotion with a bigger paycheck, a new job with a long commute, retirement or aging, divorce and so on. As your life changes, what you require in a home changes too.

Apart from the question of size – whether you need something larger or smaller – you may be looking for an upgrade in the quality of your home. For example, energy efficiency and low monthly utility bills, little or no need for renovation and improvements, an updated kitchen, age-in-place features, more privacy or lots of storage space.

In fact, these features were among the top 10 unmet housing needs in a national household survey by the Demand Institute last year. If your home doesn’t have these features, you may decide to move to get them. And if your home does have these features, it’s likely to be especially attractive to buyers if you have other reasons for selling.

2. You have significant equity in your current home

You may be lucky enough to have lots of savings and assets apart from the ownership you’ve built up by paying down your mortgage. But for most people, home equity accounts for the lion’s share of personal wealth. So they need proceeds from the sale of their home to qualify for a loan to buy a new one.

The good news? Equity is back. According to the Case-Shiller indices, the leading measures of residential real estate prices in the US, the market has fully recovered from the recession, with home equity doubling in the last five years.

In fact, Portland ranks #6 among 88 metropolitan areas for its share of equity-rich homeowners. Over 33 percent have a loan-balance-to-home-value ratio of 50 percent or less. The national average for equity-rich homeowners is 23.4 percent. Of course, you don’t have to be equity-rich to sell your home. Many Portlanders have the financial means to make a move, not just those who meet the definition of that term.

3. Portland continues to be a lopsided seller’s market

The Portland Metro market has favored sellers since March of 2012, but the trend has intensified over time. The threshold for a balanced market is 6 months of inventory, but we haven’t broken two months since February 2015. This year inventory peaked at 2 months in September and October, and then slipped to 1.8 months in November according to the Regional Multiple Listing Service. Meanwhile, the current figure nationally is 5.2 months.

In a seller’s market, where demand outpaces supply, homeowners have the best chance to sell quickly, at or above list price, and under other favorable terms and conditions.

4. Portland is expected to remain near the front of the national pack in home price gains next year and mortgage interest rates may rise

Realtor.com predicts that Western metropolitan areas will see much higher gains in prices and sales than the country as a whole next year. Portland is forecast to be among the top 10 markets, with price growth of 6.6 percent and sales growth of 5 percent.

Though interest rates remain at historic lows, they spiked after the election last month. And last week the Federal Reserve raised its key interest rate for the first time in almost a decade – by a quarter of a percentage point. Mortgage rates will likely rise in the coming year.

In an environment of rising prices and interest rates, it’s wise to buy a home sooner rather than later, especially if you’re trading up. You’ll get more for your money and a lower monthly payment than if you wait.

5. There are real advantages to selling in winter rather than waiting for spring.

The idea that winter is a bad time to list a home is a myth according to US home sales data for the past four years through August 2016.

In Portland, winter takes 2^nd place after spring for the percentage of homes sold above list price – 13.8 versus 15.2 or a percentage point difference of just 1.4. There is a bigger seasonal difference where the percent of homes that go under contract within 30 days is concerned. At 33.9 percent, winter takes 3^rd place after spring (38.6 percent) and summer (35 percent).

But other factors offset the advantages of listing in spring. As explained in Item 4, sellers who will buy a replacement home stand to get more for their money and a lower monthly payment by acting sooner rather than later. Furthermore, both sellers and buyers face less competition in winter, sales close faster or spend less time in escrow because the market is not as busy as in the spring, and buyers who are looking tend to be more serious.

Of course, given Portland’s very low inventory, what holds many local homeowners back is concern that they may not be able to find the right replacement home and uncertainty about whether to buy or sell first. But there are lots of ways to hedge your bets. Click here or on the image for a free tool that will help you develop a game plan.

Nov 18 2016

In the biggest transactions of your life, the price has to be right — get your head into the game with home sales data

If you’re a fan of HGTV’s Property Brothers, you may wonder how realtor Drew Scott can travel around Canada and the US confidently telling sellers and buyers what homes – theirs or others – will sell for. After all, real estate markets are highly localized, not only from city to city but from neighborhood to neighborhood. How does Scott wrap his head around so many of them?

The answer in three words is comparative market analysis (CMA).

Whether you’re considering putting your home up for sale or making an offer on someone else’s, a CMA enables you to estimate its fair market value. Using data and digital applications from the local multiple listing service, your realtor can make side-by-side comparisons with homes that:

Closely resemble the property in question in size, features and quality;
Are located in the same area; and
Have sold recently, are pending, or currently on the market.

Dollar adjustments up or down are made to comparable properties (or “comps”) depending on how they differ from the subject property. For example:

Do they have more or less square footage?
Are they older or newer?
Have they been updated or remodeled?

And so on. Then the adjusted values of comps are averaged to estimate the fair market value of the subject property.

A CMA is both science and art. On one hand, the math and some selection principles are objective. For example, recently sold homes take priority over other types of comps. Since their sale prices are unknown, pending and active listings play a limited or supporting role in the process. And distressed homes should not be included. Fair market value assumes that both buyer and seller are knowledgeable, willing and unpressured. In a short sale or the sale of a foreclosed property, the seller doesn’t match that description.

On the other hand, a realtor’s intuition and local market knowledge also influence the selection of comps and the adjustment of their prices. It’s impossible to assign an objective dollar value to a view, a fireplace or a pool, for example. A realtor can look to appraisers for help, but there’s always an element of by-guess-and-by-gosh in the process.

That said, CMAs are an indispensable tool in buying or selling a home. They not only help you to get or pay a fair price, but also save time and stress. If you list your home at a fair price, you’re almost guaranteed to sell it faster (and for more money!) than if you ask too much. And if you’re confident in the value of a home that you want to buy or sell, you can approach negotiations with greater strength and peace of mind.

Jul 25 2015

5 winning strategies for Portland homebuyers

In this posting, I offer an inside look at an open house I hosted recently. My aim? To draw lessons for buyers in Portland’s hot market.

A sweet, well-kept bungalow in the friendly Southwest neighborhood of Maplewood, the property was listed at $325,000. Built in 1910, it has a defined entry with coat closet; a window seat, fireplace and original hardwood floors in the sitting room; two bedrooms, one bath and over 1,400 square feet; and a large backyard perfect for entertaining – with a wooden deck and fence.

Though close to downtown, home to a highly rated elementary school, and criss-crossed by hills, creeks and green spaces, Maplewood is not known as a walkable neighborhood. But a house of the same vintage just across the street has been converted to a popular café with garden space. Among other things, it hosts monthly neighborhood association meetings.

Given so many desirable features and a friendly price point, I had expected lots of traffic when agreeing to do the open house a week earlier. And over 20 parties – mostly Millennials – visited in the space of two hours.

The listing agent and I had also expected the home to sell quickly, but we couldn’t know how fast. It sold the day after it went on the market and the open was announced. So I had to break the bad news to each of the visitors Sunday.

A few left without touring the house. Many more said they could understand why it had sold so quickly after having a look around.

Who was the lucky buyer? A Baby Boomer looking for compact, one-level living as she nears retirement. She turned up with her agent toward the end of the open to plan renovations. We talked about removing half the wall between the kitchen and sitting room to create a breakfast bar and open plan living.

I asked if it was her first offer. She laughed and shook her head. Her agent described her as battle-scarred.

The moral of this story?

Be persistent – You may make several offers on several houses before succeeding.
Know your needs and wants – If you clearly identify your “must-haves,” you can size up a home quickly and compromise on your wants. It’s normal for your priorities to shift over time as you see more properties. Just stay focused on your current needs.
Know the market – Home styles, prices and inventories in different neighborhoods are bedrock realities your needs and wants bump up against. The internet and your realtor can help you to understand these realities. Armed with the bulleted figures below, for example, a would-be buyer could have spotted a great opportunity to move into Maplewood at a low price point and predicted keen competition and a quick sale.
- The median price of a home in this close-in, close-knit neighborhood was $380,000 in 2014 (the most current data available)
- Whereas the median for Portland Metro including outlying areas was $300,000 last month
- So the bungalow list price of $325K was much closer to the Metro median than the Maplewood median
- The number of homes for sale in Maplewood decreased by over 31 percent between June 2014 and June 2015
- There were just 7 active listings in the neighborhood at the time the bungalow went on the market
Be prepared to pounce – Knowing your needs, wants and the market helps you to act quickly. Getting mortgage preapproval before starting your search is also key. And it’s important to view a property that speaks to you as soon as possible after it goes on the market. Waiting even two days may be too late for a good home in a good neighborhood.
Make your offer sweet – Your first offer should be your best. You may not get another chance. Be prepared to meet or exceed the list price if your realtor determines that it’s fair market value. In some cases, it can be a good idea to include an escalation clause, which commits you to beating the best offer by a certain dollar amount below a stated ceiling. While price is key, other factors can come into play. Your realtor should contact the listing agent to ask about other factors and tailor your offer accordingly. For example, you may win the seller over with:
- a slow or fast closing
- a rent back agreement allowing the seller to stay in the home for up to 90 days while trying to find a new one
- a “clean” offer that minimizes or waives contingencies and conditions
- proof of funds for the down payment and closing costs along with a mortgage preapproval letter
- a personal letter explaining what features of the home wow you

Jul 01 2015

On the outside looking in? 5 tips for breaking through financial barriers to home ownership

Commuting across Hawthorne Bridge (Jesse Millan)

Good job, millennials! More of you are achieving the American Dream of home ownership, historically the main path to building personal wealth. But there are still challenges ahead. This posting reviews common barriers first-time buyers face and offers tips for overcoming them – before you ever begin actively searching for a home.

The National Association of Realtors (NAR) announced last week that the rate of US home sales peaked to a 5+ year high last month, in part because the percentage of first-time buyers rose. They accounted for 32 percent of all sales – up from 30 percent in April and from 27 percent a year ago. In turn, millennials account for over two-thirds of all first-time buyers.

This is good news for all homeowners. First-time buyers are a bellwether of trends in the market, which is still recovering from the recession. In making the transition from renting to owning a home, they start a chain reaction that allows repeat buyers to move up the housing ladder.

Still, the proportion of first-time homebuyers is well below the norm of 40 percent. There has been plenty of analysis of this trend over the past year.

Hardest hit by the recession, young people have faced higher unemployment rates, more part-time work and lower incomes.
Many carry large student debts.
The cost of renting has risen along with home prices, making it more difficult to save money for ever-larger down payments.
Inventory of the lowest-priced homes has decreased.
Post-recession lending standards and terms have put mortgages out of reach for many millennials.

NAR attributes the May rise in first-time buyers to rising employment rates among young adults and a friendlier lending environment. Last December, for example, the housing finance giants Fannie Mae and Freddie Mac introduced a 3 percent down payment program for borrowers with a minimum FICO credit score of 620. NAR thinks the housing market will likely see more newcomers in the months ahead, but cautioned that further increases will depend on how much home prices and mortgage interest rates rise.

Finding a good house at the right price is especially challenging for Portland millennials. In May the Metro area had a home sales inventory of just 1.7 months compared to a national average of 5.1 months. As explained in my posting of May 14, low inventory has created a hot or lopsided seller’s market with multiple offers, quick sales and rising prices. Competition is especially fierce at lower price points, which are usually most attractive to first-timers.

What’s steps can you take now to lay the groundwork for breaking into Portland’s hot market?

Estimate how much mortgage you can afford. HouseLogic and Realtor.com explain how to go about it. Itemize your current monthly expenses. Include a monthly average for irregular items like car maintenance and vacations. Exclude what you’re paying for housing now, such as rent, utilities, and parking. Subtract the total of these expenses from your net monthly income. The balance is what you can afford for homeownership each month, including the mortgage payment, insurance, property taxes, utilities, maintenance and repair, and any homeowner association fees.
Save for a down payment. Having itemized your monthly expenses, you’re well on the way to creating a monthly budget. Put expenses into 2 categories: needs and wants. Brainstorm ways to reduce the cost of needs. For example, Portland rents have skyrocketed over the past year, rising nearly twice as fast as home values. Can you move in with family temporarily or find a roommate or cheaper housing? Try to eliminate as many wants as possible from your budget.
Review and strengthen your credit. Your credit score is a key factor in qualifying for a home loan and the rate of interest you’re charged for it. As part of Task 1, get a free credit report here. HouseLogic offers 7 tips for improving your score.
Track changes in your financial position over time and revisit your goals and plans. You’ll want to revise your estimate of what you can afford as you go through Steps 1-3. For example, the more money you save for a down payment, the less you’ll need to borrow and the lower your interest rate will be. Or the higher you boost your credit score, the lower your interest rate will be. In either case, you can reduce the total cost of buying a home and your monthly payment. Or you can buy a more expensive home (and take on a larger mortgage) without increasing your monthly payment. Try playing around with a mortgage calculator to see how this works.
Visit Homeownership Opportunities Website Northwest. I’ve saved one of the best tools for last. Sponsored by Portland’s realtors association, “HOWNW” aims to educate and empower consumers. One menu tab provides information about the homebuying process. A second connects visitors to homebuying workshops across the city. And a third offers customized searches for programs that help people with lower incomes, little or no down payment or lower credit scores get into a home of their own.

Jun 20 2015

Good news for Portlanders – livability is also profitable

ian-sane-autumn-evening-bench-commercial-ok-w-attribution — (Ian Sane)

As Portlanders know, walkable urban development is good for the environment and for community ties. But it also builds prosperity.

At an annual trade meeting last month, realtors and real estate developers learned about the growing demand for and economic benefits of walkable urban neighborhoods.

Walkable areas generate four times the tax revenue of regional and business malls.
They have a 41 percent higher Gross Domestic Product compared to non-walkable areas.
Though home prices are generally higher in walkable neighborhoods, they are actually more affordable to residents because transportation costs – usually the second largest household expense after housing – are lower. People living in walkable areas spend 43 percent of their income on housing and transportation on average, while those in non-walkable areas spend 48 percent.

Panelists at the May meeting of the National Association of Realtors (NAR) also suggested that obsolete zoning regulations in many cities may hold back the development of walkable urban areas – and America’s economic growth.

These trends and findings seem to promise a bright future for Portland, which has long been regarded as a model of urban planning and development. Residents, developers, investors, businesses and local officials have a common interest in honoring and extending the legacy of walkable urban neighborhoods here.

Portland architecture critic Brian Libby revisited that legacy in a recent posting on Leo Williams, former head of the Portland Planning Bureau and longtime member of the Historic Landmarks Commission. Williams received the University of Oregon’s annual George McMath Award for historic preservation last month.

Libby reminds us that iconic Portland places like Waterfront Park, the Central Library, the Pittock Mansion, Old Town and Skidmore either didn’t exist or were severely threatened when Williams began his career in the late 60’s.

He took a pragmatic and collaborative approach to making the city more livable, working with developers, elected officials and residents to preserve and adapt historic landmarks worth saving, and to encourage investments in dense planning, greenspace and mass transit.

Today Portland is “a city where people want to be,” says Libby, and a place where they can expect to prosper, according to the NAR. But we have to follow Williams’ example in finding common ground for common action.