Oregon MAI appraiser Mark Barry talks about past, present and future trends and devaluation in the Portland real estate market.
Is it time to buy into the Portland housing market?
Many investors think this is the bottom of the present devaluation real estate value cycle in Portland, Oregon.
Other home buyers and investors are a bit more cautious.
It is an Oregon state law that home sellers must disclose past or present home drainage problems in the home being sold, whether those drainage problems were solved or not. This must be accomplished in writing, during the home sale process, as per your Oregon home condition disclosure addendum.The signed addendum must be delivered to the potential home buyers, by the home sellers or their agent, prior to acceptance of any earnest money agreement accepted to sell it.
Get your home buying done before prices are said to have stabilized by the end of 2010, and prices have again started on the way up, faster than expected again.
Lenders can turn the real estate game on any time they wish. And soon they will again.
Just imagine how much they are hoping the Portland real estate market recovers soon, as lenders of all sorts are sitting on huge interest spreads between the fed funds rate and the market rate, with money being thrown at them.
Huge profits are just around the corner for the banks, as the real estate market recovers.
The real estate pros will not be looking for REO’s from lenders, or bail out problem attitudes or homes, usually coming from hurting and/or emotional for sale by owner home sellers.
Working with most all of these fine folks is a waste of precious time however, and during a fleeting opportunity as well.
Remember, home sellers with drainage problems, it is an Oregon state law to disclose past or present home drainage problems, solved or not, during the home sale process, as per your Oregon home condition disclosure addendum, which must be delivered to the potential home buyers, by the home sellers or their agent, prior to acceptance of any earnest money agreement accepted to sell it.
You are not excluded from the law, or its enforcement when necessary by simply being a for sale by owner that pleads ignorance, when caught lying to home buyers about the condition of your home, and whether it has ever had a drainage problem, whether solved by your standards, or not. You must disclose it.
Top level real estate investors will be concentrating on selliing new listed inventory only, to pre-approved, not just pre-qualified home buyers.
Older classic homes, with no deferred maintenance, as well as newer contemporary homes of quality and design will be first on the tour.
Many of these types of older established homes are great long term investments, safe for “widows and orphans.” They should be bought at a premium, knowing the money is worth it.
Last of all, when the market has recovered and activity and attitudes are back up, probably next summer, it will be time for the realtors out of inventory in listings to be working the burnt out for sale by owners, as well as those homes with home drainage problems.
Not until then. That could be a long way off to a pay check on a home sale, if you are a home seller with one of those groundwater damaged homes, with no resolve, education, or cash to fix it, but still want to sell it. You will be unsuccessful without the most eloquent of miracles performed on your behalf by the man above. You chances are not good of ever even making the home qualify for a new loan to sell it in that condition.
Buying the best quality real estate architecture is for real estate pros who get in early, and know the difference in quality and timing. They have seen it all before in the past decades of market transitions.
The rest of the late home buyers, perhaps only months to days late, are just fighting for scraps left over from the feast, while putting up with the increasingly bad attitudes of home sellers, agents, and lenders, as well as adjusting mentally and significantly, for higher prices popping up over night, in a potential new optimistic sellers market.
As the spring and summer real estate market gets going, look for the expensive art pieces to go first.
The classic architecture first. Trophy homes priced well under market, but that required cash buyers, as jumbo loans are hard to come by in the present market.
These are all my opinions, by the way, from start to now. Mark Barrys contribution is coming, hold on folks. I am setting it up.
Then the homes of good quality in general, with superior locations and views. Waterfront sites, etc. always come to the top of the stack, especially if they are art as well.
The best realtors will be working existing new inventory, and specifically their own listings that meet the home buyers criteria.
Fsbo, for sale by owner homes, are a detraction from reality, and basically, to seasoned professionals in the real estate business spending their own money, a completely worthless, futile, frustrating, failed effort. By the numbers, worthless.
A program of blind faith and hope, not worth putting time into. Too much lost while fooling around with those dreaming folks.
Fsbo’s are hypothetical, and potential at best. Home values that are therefore questionable, and seldom substantiated by appraisal statistics, comps, or anything other than a homeowners blue sky dream of what their home might be worth, or how much dough they need.
It never changes. Serve and volley. Few scores. Loads of wasted time, and real missed opportunities.
If you were an agent coming into my office, asking me a question about what to put your time and money into , to bring back sales to the company, I would tell you what I have said above.
Most of the real estate pros will not be wasting their precious time running a buyers shuttle bus for home buyers looking at everything, without knowing what those home buyers are looking for specifically.
Most of those new buyers will have landed themselves on a few homes on the computer to look at, that the agent says are days to weeks old only.
Good agents hit the multiple service in the early morning at breakfast. And get clients to run early looking too.
Portland home value statistics, courtesy of The Barry Apartment Report, a well respected source of quality residential and commercial-investment property appraisal statistics and professional marketing information.Mark Barry is in my opinion, the top MAI appraiser, and appraisal educator in Oregon.
Mark Barry has been at the top of the commercial-investment real estate appraisal and real estate development industry in Oregon for as long as I can remember.
I started selling real estate in 1978 in Oregon, as a 30 year old, and he was around then.
Mark Barry speaks often at high profile dinners to bankers and legislative members, who listen intently to every word he says.
The banks respect him for being conservative and honest, while he gets high marks from his real estate contemporaries as well, for the same qualities, as well as others.
Included is an except from a recent conversation I had with him, as well as quotes from his winter 2010 Barry Apartment Report.
Mark Barry graciously consented to allow my use of this information, here-in shared with you, courtesy of the Barry Apartment Report, a trusted source of Oregon professional appraisal information.
What has happened to Portland real estate all of a sudden?
Optimism seems gone.
Sad faces abound. Tough times. What’s up with Portland?
Portland, Oregon, the once seemingly bullet proof real estate market, seems to be going through a down cycle after all. Or at least in the last year or so, has definately tanked, albeit not as bad as some markets across the U.S.
The buzzards have come home to roost alright, as they say.
We all feel it and see it.
Statistics confirm that this is true. Every picture tells a story. “Thanks, Rod Stewart”.
The Barry Apartment Report, 2010 winter addition, written and published free to commercial real estate industry professionals, by Mark Barry, MAI appraiser, Portland, Oregon.
The Mark Barry appraisal team tracks all new multi-family construction in Oregon, as well as commercial and industrial development land and buildings, residential land and home sales, both new and existing, plus multi-family sales data, and new multi-family starts and appraisal standards, residential, commercial and industrial building starts, prices per sq. foot for land, residential construction starts by quarter, sales prices for appraisal comps, financing alternatives that affect residential and multi-family real estate valuation, and if you can believe this, much, much, more information than you could wrap your mind around comfortably, in one setting.Mark Barry is hot potatoes, and knows his appraisal standards.
Check out what he has to say about where we are presently in the Portland real estate market. Where we were, with respect to home values in Portland, Oregon just a year or two ago, right on through to the present, where we are now; and perhaps, for a bit longer, into the future, where we may be going as a real estate market in the Portland area, as well.
Quote. Mark Barry. “2009 will go down as one of the toughest years for the Portland economy since the early 1980’s, with only the Great Depression causing noticeably more pain.”
“While we all know how tough the second half of 2008 was, there was little to prepare us for the turbulent waters and gale force winds which impacted the Portland economy and commercial real estate in 2009.” “So just what happened here in 2009?”
Portland economy: “The big surprise of 2009 was just how weak the Portland economy was.”
“Over the twelve months ending in October 2009, we have lost 53,200 wage and salary jobs, or over 5% of our employment base.
In addition, our un-employment rate rose from 6.8% in October 2008, to 11.6% in October 2009.” quotes from The Barry Report.
“Single family market: “Two years ago, Portland was considered one of the best single family home markets in the country.”
However, home values slipped by 8.5% in 2008, and another 9.8% in 2009.
Portland is down 20% from the peak in August of 2007.
We currently have around 8.5 months of supply based on current home sales.
The median price of a home in Portland is currently $239,000.
IHS Global insight, Wells Fargo, and Fortune Magazine are all forecasting a decline in Portland housing values in the range of 5%-10% in 2010 due to lay off, mortgage defaults, and expiration of the $8,000. tax credit on 6/30/10.”
Mr. Barry feels that albeit a slow first half of 2010, the last half of 2010 will produce a more productive real estate market in the Portland residential market, although he feels that the commercial and multi-family markets will be slower to recover in 2010.
He sees continued normalization in residential by the last half of 2010, and stronger again by 2011 in both markets.
Fix your home drainage problems now folks.
Get your home free of the home drainage boogie man. You will sleep better too.
Be one of the homeowners that sells right away in the first cycle.
Prices will be strong for the best of the best, compared to the rest.
The bargain hunters will find gold when it starts, not later in the game.
Home prices, as well as home sellers attitudes, will already be on the way up when the word gets out about how home sales are up. Get in before that time.
Portland doesn’t wake up until the sun starts shining in spring and the bulbs start popping out.
Portland will again show its fine colors in many ways, and stand out again, for the same reasons as before, for the outstanding home values that our area represents.
That will not change. We are still one very fine location, Oregon.
Cash is going to be king in this market, as well as it is in every other market, except a market like we had previous to this mess, where money was dirt cheap and available, clouded by speculation and structured investment vehicles. Investment vehicles? Yeh, more like hit and run vehicles, I think.
When this market comes back, very few speculators will dive right into remodels and large capital improvement cash outlays, or new spec. home construction, to begin with. Not in the first few months, to first year, I think.
You will see a massive flight to established architectural home quality, as I have described previously.
Turn key architecture first. Commercial-investment next with hot profitable cap rates and upside. Land and fixers last.
Development is likely to lag behind the residential recovery in Portland. My opinion too.
Most capitalized astute home investors will be cherry picking quality homes for months, starting at the beginning of spring 2010 probably, when new inventory will hit the big board multiple service by the thousands in Portland.
Quality doesn’t have to be classic either. It can be just under valued, because of hard times, because of all the boards, bricks and man hours needed to replace it.
I would not waste my time looking and talking with for sale by owners, if I was a buyer in the new market.
A total waste of a day. I assure you.
That is why real estate agents must spend their money and time wisely, on something that has a negotiated fee, and a firm price.
Since almost all buyers use buyers agent representation, which is free to them, almost all your home buyers will have agents. No commission established, not any reason at all to show it.
If the buyers come up with it. Discourage it, and move on to the real values, that are real, not some homeowners idea of getting away clean, more like pie in the sky, and a pig in a poke. And always a guessing game too.
I think additionally falling homes prices forecast for Portland in 2010 are not that severe, and will actually stimulate home buyers to come into the action, given the other factors that lead us to believe we are at the bottom of this devaluation cycle.
Portland real estate value, as a real estate market in general, country wide, is rising and not falling, as our home prices fall a bit more, as compared to the rest of the countries real estate markets.
Think about the rest of the nations homeowners, sitting in some dead real estate market somewhere, who just might want to come play in this market at the beginning, when money is made, after they finally sell that home for much too little. Time to find a new game.
A great market often comes on fast.
This is what will turn the Portland real estate market around in part. Local buyers mixed in with new incoming buyers, looking for value and turn key architecture especially.
Real home value and good old Portland location, location, location, as well as quality, quality, quality.
That is why Portland was out pacing most of the rest of America in home value stability in the first place.
It will return again for the same reasons.
Many factors indicate that the bottom of the present Portland real estate market is almost here.
Slow growth may follow in 2010 and 2011, according to Mark Barry, quoted above, but lots of good properties will be traded at good prices in the first few weeks of the recovered market, before the word gets out that summer sales are hotter than expected, and tv personalities use it as fodder for their local ratings.
True real value in the Portland real estate market will return in 2010, and be again fully uncontested and recognized.
Look for a stronger Portland real estate market by 2011.
Sellers will not be as flexible, and they will all have a different attitude as well. My way, or the highway.
Cherry pickers delight in this type of emerging real estate market.
These are investors with cash, who have been waiting for this very moment in time to finally come. It is real estate Christmas to them.
Portland, Oregon is just a grab bag of interesting opportunities for investors.
The new Portland real estate market will be especially exciting to those buyers looking for turn key, value added properties, without deferred maintenance.
Most serious investors will be looking for properties with no deferred maintenance.
Real estate play makers always come up with a score.
When I was selling commercial-investment and residential real estate, I would take a quality investor out, show that investor a property he wished to buy, and tie it up, before his other home sold, if at all possible.
In a buyers market, a 72 hour first right of refusal comes about free for the asking from a motivated seller.
So, in a market like this, we would tie up a few properties on 72 hour contingency, first right of refusal.
If the customers home I had listed sold, we knew we had first chance at picking off what we believed to be the best home pick available at that time.
I would proceed to write the new earnest money agreement to buy that home, making the new offer to buy subject to the listed home closing, and go forward.
The key to making that work is always focusing on new inventory during the home sale process, watching to replace the old pick with the new, while selling the present property.
You will find this not easy to do in a sellers market. Unlike the current real estate market we are experiencing, which is a buyers market.
This method can make experienced home buyers wealthy fast, if they hit it right, and often enough.
These seasoned investors stay ahead of the other part time home lookers by light years, by just doing it more often and better, as well as with better tools and agents.
I personally am not afraid of the distance left to fall in Portland real values in 2010 and beyond. With respect to properly chosen, pride of home ownership properties only however. Architecture only.
A quality home will outpace the rest, like a race horse running circles around a mule, especially in a strong sellers market, recognized usually by quickly appreciating home prices, and tough seller terms, followed by multiple offers.
An additional 25-50% in value increase or more, in hot sellers real estate markets, is not uncommon, across the country, for one of these types of classic homes at a choice location, during a strong sellers market, with multiple offers common.
I am talking that much in value above what the appraisal price supports at the time, in some cases, where a sellers market really gets spinning out of control, as it has in California many times.
Those are the homes you make big money on, not the dirt bag capital improvement guzzling average fixer upper, that looks like everything else out there, and does not have the superior site either.
I think the upside in a superior crafted, turn of the 20th century craftsman, which could be, for example, a turn of the century 4 level historic Portland west hills brick classic crafted Tudor or Craftsman style home, that 2 years ago was priced at $300,000 more, for example, is well worth the potential downside, when the market turns.
The northwest classic home architecture, as well as the materials and building site, cannot be reproduced at all today at any reasonable price, if at all.
Even copies of old homes, such as top line neo-traditional homes, made from todays best reproductions of quality period materials, cannot come close to yesterdays vintage installations in many cases. Those are the ones you are looking for anyway.
If you started from scratch, trying to buy the land first, and reproduce one of those homes, starting with the lot you cannot find to begin with, and the old growth douglas fir beams, not available, up to the pressed hemlock cove mouldings, also not available, you can see your plan would be dead before it started.
You just cannot imagine how much these late 1800’s to early 1900’s Portland area homes reflect a period of building quality, in many cases. Not all cases.
Some of these homes are art really pieces. Not just real estate.
The best of these types of homes command high dollar, even in down markets, but a buyers market, with a desperate seller, is the only market and seller you will ever be able to buy one from.
As soon as the selling homeowners knows the real estate market is going up again by leaps and bounds, instead of down, ripping them off for their retirement money, the property comes off the market, quickly, unless survival was the primary motivation for the sale to begin with.
I love the old colorful hardwoods, art, and masonry in many of those homes. Many times the drainage really is bad however, and reconstruction of masonry/foundation may be required. Inspect prospective home purchases for signs of groundwater. Especially skim coated brick foundations, or existing brick foundations.
The game stakes are high at that end of the real estate investment world, but the return is great as well. And continues to go up as a hot sellers market grows.
Knowing where you are going, before you sell, using 72 hr. first right of refusals is a great thing for someone prepared to use it, and make it work.
The property value appreciation, during a great market for home sellers, owning a home as described above, would make up for a small dip in home price, from what they paid for the classic home now, even if prices dipped more this year as projected. That projected loss may never appear either.
When the market starts up, this amount will be made back in potential home value within months, as the real estate market recovers, even as some experts suggest.
Professional real estate knowledge requires experience, but the fuel is courage, and putting your money where your mouth is.
Selling into a buyers market requires a home priced right, without repairs of any kind. This is our present condition in Portland, Oregon.
The Portland market has way too many homes with drainage problems on the market, with many, not few, lender/owners and sellers, looking for cheap way out of their drainage money pig, never fixed and still squealing bloody murder.
A pig they intend to starve to death first in possible, ignore second, if they must, and if at last they must, coat that pig with a new layer paint, like lip stick, and put her out there again looking ever so spiffy and painted up, hoping for ignorance to walk by with a load of dough needing a bad home, and never knowing the difference.
Don’t forget the crawl space investigation required before you write that earnest money agreement.
Selling into a buyers market requires properties without deferred maintenance in the way of chronic drainage groundwater problems, and/or structural damage.
Get those home drainage problems solved.
You don’t have a snow balls chance in hell of selling that good to average home, with those drainage problems, in this market, or in any other real estate market I can imagine in the future, except a strong sellers market.
A quality historic home, especially in a sellers market, no problem. Always an informed buyer, and a budget to install hand excavated french drains, and fix that drainage problem, as that type of home buyer is not the average home buyer, who is quite ignorant of home drainage reality.
Most buyers have been fed so many lines of b.s. that they are in a confused state, at best, and would not know who to believe at all.
The new real estate market will be dominated by realistic and informed home buyers, many of them young first time buyers, not buyers from the last boom market, posing as the spoiled investors many of them were, wearing rose colored glasses, holding up high volume hopes, flying their hair in the wind, with the top down, sun going down on the ocean, looking for that new home flip lipstick pig begging, for that new coat of lip stick, and quick profit for the sellers.
Nice dream. Great work, if you can get it.
Educated home sellers that find this web site won’t be fooled.
Todays new home buyers won’t get tricked into just installing a sump pump and not stopping the groundwater entry either, and then being forced into closing escrow with groundwater problems intact and passed on, in opposition to their stated earnest money agreement rights.
Those drainage problems are a cancer to your homes structural health and strength, if not solved with a year or two, instead of never, and left forever.
Many of the new Portland home buyers have been reading this web site, and will want home drainage problems solved before closing of escrow. No exceptions.
These home buyers will find your problems, and pass on you and your lovely home right off, if you as a home seller look like you are a non-disclosing type of home seller, who is trying to hide the homes history of drainage problems from the new buyers and the lender.
The gig is up on that game folks.
Remember, home sellers with drainage problems, it is an Oregon state law to disclose past or present home drainage problems, solved or not, during the home sale process, as per your Oregon home condition disclosure addendum, which must be delivered to the potential home buyers, by the home sellers or their agent, prior to acceptance of any earnest money agreement accepted to sell it.