Foreclosures Decline in Portland, but not every part

Latest statistics from CoreLogic and RealtyTrac have shown that Portland foreclosures are on the decline in 2011, and will continue throughout 2012.  Rates of decline in Portland have dropped by 3.21%, making the percent of homes in foreclosure for the city 2.39%.   The amount of homeowners delinquent on their mortgage payments, is also lessoning.  The foreclosure percentages are fairing better than the nation, and also better than the state.  The state is at 2.8%, and that was an increase.  The overall national foreclosure rate is 3.41%, and that number is on the decline.

Things are sounding good for the Portland area.  RealtyTrac reports that the percentage of sales for the nation that are actual foreclosures is around 20%.  Whereas in the state of Oregon, only 15% of home sales are comprised of the bank owned (REO) properties. 

I thought I would take that a little bit further and show you what 2011 looked like in some local sub markets of Portland.

For the first month of the 2012, the following statistics are RMLS data of the percent of bank-owned, single family residences and condos, in proportion to the total closed sales for each area.

1. Beaverton/Aloha      35%
2. SW Portland            20%
3. Hillsboro                  36%
4. NW PDX 97229     10%
5. NE Portland             18%
6. SE Portland              29%
7. Lake Oswego/WL   18%
8. Tigard/Tualatin         26%

It appears there is more foreclosure activity going on than the Realty Trac suggests.  Or, the January 2012 numbers suggest that Nov and Dec sales were gobbling up more bank owned homes that the previous year's trend. 

Nevertheless, what occured in the last months of winter, is reflected in the first part of the year, and the result has left us with an anemic supply of inventory, both traditional, bank owned, and short sale.  We now are at the lowest level of housing supply in the last 3 years.  The metro area of Portland sits at 5.3 months.

Intel means $17 billion to Oregon economy

In 2009, it was estimated that the Hillsboro Intel presence has made an impressive $17 billion impact on the local area economy. 

D1X construction Oct 2011, from Synopsys

A report, produced by Eugene-based research firm ECONorthwest, shows that the chip-maker is responsible for nearly 26 percent of all economic activity in Washington County, almost 10 percent in the Portland area and 5.6 percent statewide. (This report was done well before the announcement that Intel was expanding D1X, adding $3 billion in spending thru 2013) 

Intel may hold its HQ in the San Francisco bay area, however, its largest concentration of employees is right here in the Hillsboro area.  Currently they employ over 15,000 employees over 6 campuses in the Washington County area, just 15 miles West of downtown Portland. 

These are the facts that many people already know.  The study was to show the impact that Intel has on the community.  Other than what's on the payroll and the income taxes spent, how far does Intel's reach span into the area's economy. 

1. Start with consumer spending.  Intel's employees average $117,000 annually.  More than twice the average income in the county.  Intel employees help local retail businesses.
2. Next, for every job created in Intel, another 3.1 jobs are created in another area of the state's economy.  That's just amazing.  Think about that.  If Intel announced, that D1X, the new Fab, will employ another 1000 jobs in the next few years, that's saying, another 3100 jobs, making a total 4,100 new jobs in the area.
3. Housing.  More than half of the Intel employees on the 6 campuses, live in the Beaverton, Hillsboro area.  That's a huge impact on the Washington county.  I'll bet that the other half lives in the 97229, Bethany to Forest Heights area.  Which is another huge affect on Washington County.

It's great news for the area to have such a partner.  But it's always scary to have one company make such an impact too.  Good thing we have Nike.

Portland Ranks High on Hip List

The real question is, "Are they ranking Hipsters? or Hippies?"

I think the answer lies in both. The categories for criteria were: Culture, Music, Sports, Housing, Young Populaton, Education and Alternative Activities.  Both classes fall into appreciation of all of these interests.

Portland ranked #4, behind San Francisco, Boston and Denver respectively. The study was made complete by the folks at Sperling's Best Places, and the fine people that make EDGE Shave Gel? Because the study was called Cities on the Edge.

Hippie vs Hipster

Short Sale Bail Outs. Pick one, MR MegaBank!

House Bill preventing deficiency lawsuits pursued by banks 2 years post short sale transactions.

What Rep Matt Wingard is trying to do, is make short sales easier, less scary for the home owner, and then ultimately it will lead to less foreclosures.

If the home owner and the banks find a happy ground to sell homes in the short sale arena, we will have far less vacant, distressed, liabilities on our hands, that are tearing down our state's housing values. Of course, the job market, the mortgage shrinkage, and overall supply and demand hurts too, but we don't need extra fear added to the equation. Every bit of consumer confidence helps.

Latest Interest Rate News

Latest Interest Rate News as reported by http://www.bankrate.com/ and RisMedia.

RISMEDIA, May 2, 2011—Mortgage rates remained below the 5 percent mark, with the benchmark conforming 30-year fixed mortgage rate inching lower to 4.95 percent, according to Bankrate.com’s weekly national survey. The average 30-year fixed mortgage has an average of 0.37 discount and origination points.

The average 15-year fixed mortgage stepped down to 4.14 percent, and the larger jumbo 30-year fixed rate reset the low point of the year at 5.40 percent. Adjustable rate mortgages were also lower, with the average 5-year ARM dipping to 3.69 percent and the 7-year ARM dropping to an even 4 percent.

Mortgage rates were lower this week, but the movement in mortgage rates continues to be tame. Mortgage rates have remained within a one-third percentage point band since mid-December. The Federal Reserve did little to rock the boat, holding interest rates steady and changing very little in the post-meeting statement. Fed Chairman Ben Bernanke’s initial press release was a historic event, but uneventful. While the Federal Reserve confirmed that they will halt their bond purchases at the end of June, this has been widely expected and any resulting volatility in bond yields or mortgage rates is far from certain.

Mortgage rates are closely related to yields on long-term government bonds.

The last time mortgage rates were above 6 percent was Nov. 2008. At the time, the average 30-year fixed rate was 6.33 percent, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate now 4.95 percent, the monthly payment for the same size loan would be $1,067.54, a difference of $174 per month for anyone refinancing now.

The survey is complemented by Bankrate’s weekly Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next seven days. The vast majority of panelists, 77 percent, don’t see much of any movement in mortgage rates over the upcoming week. The remainder are split, with 15 percent predicting an increase in mortgage rates and just 8 percent forecasting a decline in mortgage rates over the next seven days.

Consumer Confidence by Gallup

This is a follow up to a post I wrote in 2009, shortly after the consumer confidence had spiked from it's previous low of 53.  As you can see 2 years later, the consumer confidence of home buyers is hanging around 70% of people Gallup polled.  Looking back at the last 8 years tells a better story.  People were never more confident then in 2003.  Rates were low, banks were handing out loans, prices seemed to consistently be rising, even if only modestly in some areas of the US.  And then the entire market was pushed over the cliff in '06

So why have the last 3 years been nearly as high as 2005? 

• Have we stopped seeing foreclosures?
• Have the banks suddenly been lending money?
• Is employment the same rate as 2005?
• Have home prices been consistently rising since 2005?

None of the same trends from 2005 seem to exist, so why the confidence?

One reason and that is Affordability.

• Home prices reduced
• Household incomes
• Interest rates, century lows

Those who can buy, are experiencing this perfect storm that no one in 2005 was able to have.  2003-2005 confidence was there, because there was less fear. 

Today, you would agree, there is plenty of fear about our economy.  Sure, it's getting better.  Recovery is supposedly 2 years in the making.  But we are far from robust, and this recovery may never see robust.  Just like there were tiny recessions, we may only see a tiny recovery.

So, today's home buyer's have to deal with fear.  But, they are able to take advantage of unique factors that far over come their own fear.  And that is, home ownership, at remarkable affordability.  Home ownership, for nearly the same as their rents.  2nd time home buyers, matching the same price for their current home, and achieving much more house, for less payment.

For the complete story done by Gallup Poll click here.
www.gallup.com/poll/147248/Majority-Say-Good-Time-Buy-Home.aspx

Rentals getting tough to find | Portland Business Journal

Portland's real estate market may not be in full rebound mode yet, however, the rental market does appear so.

Supply and Demand.

With rent vs buy being so attractive, new first time buyers are gobbling up the available would be rental inventory. Without the mortgage crisis, everyone would be buying. However, there are plenty of first time buyers that are unable to qualify for a few more years. This keeps a healthy rental pool in the population. What we are seeing in the Portland area is very low vacancy rates because of this.

Vacancy Rates are below 4.5% in every submarket of the city

And in the city itself, the Vacancy Rate has dropped to 3.8%

Rents are now on the rise due to this supply and demand, and have increase 4% over the last 6 months.

In the past builders would keep up with the demand by building houses and apartments. However, we know that has slowed down to historic lows, keeping this newly created inventory from growing.

As Portland's unemployment has dropped by another percent last month, more jobs are being created, and this adds more demand for housing. And will only lead to higher rents.

Ultimately, as income rises, from more job creation, the rental population will see more benefit in the homeownership, and overflow into the real estate market. A similar "trickle up" effect. Perhaps real estate rebound is around the corner.

as adapted from Portland Biz Journal...

Rentals getting tough to find | Portland Business Journal

Video of DR Horton's new Micro Home Development

March is in like a LION

March real estate activity numbers are in for Portland Metro home sales.

Below is a summary of the report from the Portland Association of Realtors.

The most recent data is actually pretty promising.  From February to March we saw increases in Median and Average sales prices.  We saw an increase in listings too.  But based on all the new pendings and closed sales, we were able to see a significant decrease in inventory!  The decline was seasonally normal, however, it managed to be the lowest March inventory for the last 3 years.


Are you glad you escaped the housing bubble?

Kudos to you, if you missed the last housing boom, because you missed the big BUST too.

Investors and homeowners alike, that sat on the sidelines during the last real estate boom, are NOT kicking themselves today.

They may have watched home prices in many markets around the country go up 10% - 20% in one year, and thought...

"Boy, this market is really heated, I'm staying out of it" or "I wish I got in earlier, these prices today are ridiculous"

But, they did not buy earlier, and they did not buy when the market was heated, and they certainly did not buy during the free-falling bust.

What a sigh of relief. No Loss... but, No Gain.

---

Historically, real estate has gone up approximately 4% per year since 1910, almost 100 years. [reference Robert Shiller of Case Shiller from Irrational Exuberance.] Consider inflation, and that hardly seems like a good investment. Consider, leverage by financing real estate, and positive cash flow by income received, and now it looks like a phoenomenal investment.
It can look like a bad investment when you pay all cash, speculate on the appreciation, or have a large negative cash flow. Avoid those things and buy for the long term, and it is a great return.

Let's assume the most recent bust, has erased the gains of the boom. 08 erased 07. 09 erases 06. In some markets 08 may have erased 05 too. BUT, never the less, investors that bought in 2000 still have a 20%-24% gain on average. The same would also be true for some that bought in 06, may have to wait for 2016, but could receive 20%-24% gain as well.

How many times has real estate posted similar losses? The last similar drop was 2 generations ago. It is safe to say, it may not happen again in our lifetime. But if it does, it seems to wipe away recent gains, not total gains. Many buyers that are taking advantage of prices today, are saying, "We are happy to afford today's values, as we were priced out of the market a couple years ago." (not priced out a decade or more ago)

Comparatively, if you invested in the following companies for a decade, do you think you would have similar gains, let alone any of your investment back?

Motorola, Sears, Ford, Citigroup, Fannie Mae, Yahoo, Qwest, Firestone, American Motors, Texaco, Pan Am, Worldcom, Enron, Lehman Brothers, Circuit City.

Energy, Telecom, Finance and Retail Giants... no investment is 100% safe, including real estate. But many of the above companies no longer have any value left, or are facing that fate. Even, I am guilty of owning several on that list, based on raving reviews or a sparkling prospectus. No one could predict their destiny any more than the recent boom/bust mortgage crisis. Whenever something is too good, it usually isn't good forever.

This is not an argument of stock vs. real estate. Rather, I am saying, Real Estate can be viewed as a safer investment, without surrendering your entire investment to a entity that declares itself bankrupt, or corrupt CEO running the company into nothing. There is still something of value with real estate, even in the down turn. Either a roof over your head, or renting the roof over someone else's head.

If the worst is behind us, it could be another 60 years before you have to worry about losing your initial investment in Real Estate. And if you truly owned and financed said property during that period, you would own it free in clear long before that time came!

But if you want to buy or invest, you have to jump in sometime. But when?

The safest time to jump in will be after the bust. No one can predict the perfect time, but watch and see who is buying today, and don't just be the watcher.