Portland area home buyers may have heard the announcement last week regarding FHA mortgage changes.  Why pay attention to these details since it only usually affects first-time buyers?  Well, changes to entry level financing affect all Portland real estate in reality.  Also, FHA loans are by far the most popular right now and are not used by only first time buyers.  Home purchasers take advantage of the low down payment option of 3.5% and that’s the attraction. 

Financing options during boom years of 2005 and 2006 made use of loser lending guidelines like the ever popular 80/20 loans which eliminated mortgage insurance.  Those days are in the rear view mirror.  Mortgage insurance is pretty much a requirment today for anyone putting less than 20% down.  Although no buyer ever wants to pay these extra fees they are a necessary evil and insure lenders against default.  Portland’s entry level market is sustained by first-time buyers coming in with minimum down.  If we went back to yesteryear requirements of 20% down minimum the market would be crippled. 

New FHA loan guidelines:

• Mortgage Insurance Premium (MIP) increase from 1.75% to 2.25% of loan amount
• FICO minimum (credit score) 580 to qualify for 3.5% down payment
• Seller credit to buyer’s closing costs down from 6% to 3% of purchase price
• Mortgage Insurance Premium payment shifted some cost from up-front MIP to annual MIP

What does this mean for the Portland real estate?  Since first time home buyers drive the entire housing model, without these there are minimal upper end sales.  Move-up buyers are critical to the cycle.  Looser lending guidelines generate more buyers, tight guidelines eliminate qualified buyers.  Changes mentioned above are tighter and will have some affect on Portland house sales. 

Most area home buyers come in with only 3.5% total cash (the down payment) for their first home.  Statistically that’s just reality.  Sellers often are requested in the offer to pay buyer’s closing costs (loan costs) which keeps cash out of pocket to a minimum.  Figure $200,000 houses for sale in Portland will cost buyers closer to 4% of purchase price, or $8000.  With new seller contribution limits going from 6 down to 3 percent this leaves buyers coming up with the difference.  More money out of pocket is now required to get into a house, potentially.

Tightening restrictions cautiously and slowly is key to not rocking the already fragile housing market.  My guess is that overall we’ll see minimal affect on Portland real estate in general and it’d take a micro-economic guru to place figures on such changes.  Yes, home buyers may have to come up with slightly more money but we’re only talking another thousand or two and if cash is really that tight buyers may want to build up a bit more reserve before purchasing anyway.  No one wants to be house rich and cash poor, right?  Something to consider…

Portland area homes have a plethera of ideas to offer home buyers. the sky is the limit as far as varieties to choose from.  From a cozy studio condo in Beaverton to a monster classic 1900′s craftsman close to downtown close in NE portland’s Irvington district.  What’s your fancy?  Pretty much depends upon the depth of a person’s wallet. Closer in to downtown you get, the higher the price.  Stands to reason, right?  Buyers looks for upside potential through investment in Portland’s real estate should take a closer look at some of the cool vintage areas such as Irvington, Alemeda, or Laurelhurst.

For buyers not faint of heart and willing to wield a large hammer might want to take a look at recent find on 2732 NE 15th. This property is offered for sale through RMLS (rmls #9077589) by Gary Had Real Estate and gets my pick of the moment vote.  At over 5000 square feet this large classic is just waiting for a buyer to see the big picture and seize opportunity.  Driving down the 15th you’ll notice that this has got to be the last vintage structure with no remodeling. Well hidden between giant cedars it’s easy to miss. Currently offered to the public for $450,000.  Homes of similar size have sold for a million or more recently.

Taking a closer peek into the innards of our pick shows incredible features not easily found in newer homes.  Select lathe and plaster, leaded glass windows, bi-fold 8 pane interior doors separating the high ceiling rooms.  Boxed beam, wainscoting, built-in dinettes, storage cabinets and even a real dumbwaiter with original crank!  Talk about cool features!  This place has got them.  Hardwoods are on the main, 2nd and 3rd floors with nice ceiling height throughout every level, including a full basement. This is a large house!

Vintage also means that there’s tons of original everything included.  Sometimes that’s not a great plus but hey, we’re talking upside potential here.  Check out the awesome octupus dinosaur furnace deep withing the basement confines.  Gravity fed oil heat at it’s best.  This beast looks like it came straight from a Freddie Krueger movie. Not sure that keeping this guy is in a rehabber’s best interest.  Oil heating was typical of the era and buyers are always advised to check buried oil tanks for ground contamination.  Better to have sellers absorb DEQ costs if there’s an issue.

Die-hard enthusiasts may want to keep reminiscent features of the old lathe and plaster but I’m not convinced that this adds to resale value.  Observations of home buyers in Portland throughout my 8+ years in the business tells me that you’d have to come across a fairly particular buyer wanting cracked original plaster over conversion to drywall.  One of the big obstacles is how the heck to insulate these homes without destroying such.  Heating costs were no big deal in the day and, I’m going out on a limb here, but don’t think this place is going to get a LEED gold stamp of approval.

Updates required for resale on most of these home will involve electrical and plumbing.  We’re looking at possible knob and tube in this place, although there is an updated electric panel.  Most homes in Portland area neighborhoods with electrical updates have gone to a 200 amp service.  Early 1900′s homes don’t have many outlets and this place is no exception but maybe a lack of receptacles will promote Oregon’s green agenda… well, maybe not.  Owners may find it rather annoying not having a place to charge the Ipod.  Hey, just because you live in a cool classic home doesn’t mean you can’t enjoy modern amenities.

Speaking of modern amenities, the kitchen is reminiscent of days gone by.  Although, there’s some updating to some version of 80′s red laminate countertops. Most will agree that investment into kitchen updates is money well spent and easily recouped upon resale.  Our subject home has a decent sized kitchen but could benefit from rearrangement of a few walls for enlargement.  Sky is the limit here.

Overall I’d give this Irvington project house a great rating due to it’s upside potential. Investing in Portland real estate will pay off on this place if buyers limit their use of contractors and swing the hammer themselves more.  Sweat equity always helps return on investment.  A ballpark figure may put expenses in the hundred’s of thousands for our subject but when all is said and done sellers will also be looking at a home that’s pushing $800k plus within only a few short years.  Portland’s market will recover and buying opportunities like this have never been better!

Contact us to see this home today or visit the main site to search Portland homes for sale.