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…

Do you know how many qualified buyers are out there at any given time in the Portland area?  A ton.  And most are not taking advantage of our current market situation.  Here are several reasons that now IS a good time to buy Portland Houses:

• House Prices around Portland

Compare today’s prices to the last couple of years.  Portland home appreciation rates of 5% are historical averages but declining values are very rare trends.  Projections for our economy continue to be centered around mid 2009 for a turn around.  The local housing market will definitely pick up as soon as people’s perception changes.  After all, perception is reality.

• Renting vs. Buying

Just the law of supply and demand.  Areas like Hillsboro, Beaverton and NW Portland will continue sustained population growth as large companies move in high-tech locations on the west side.  These eventually fuel the need for housing.  If people aren’t buying, they’re renting.  Rental supply shrinks and price goes up.  Real estate buyers are fewer and prices of homes for sale in Portland go down (like we’re seeing now).

• Huge selection of houses

Right now we’re facing an 11 month supply of homes.  That means if no additional homes listed in MLS then the current rate of sales would take 11 months to deplete our inventory.  This is higher than in recent history giving buyers a huge advantage.  Sellers are happy to get an offer!

• Homes are a forced savings plan

Tying yourself to a mortgage is a form of disciplined investing.  Everyone has to live somewhere.  Choosing to own a home can really pay off in the long run.  Generally speaking rents and real estate prices go up.  Your mortgage payment stays the same.  The earlier you start the better off you’ll be due to equity build up.  My first house payment 12 years ago was $531/mo.  Rent for that same house now would be at least $1000.

• A Look Back at House Values

Who hasn’t talked with a parent or grandparent and heard about the good ol’ days of house prices and payments?  Timing a home purchase is optimal but it’s not likely that you’ll be successful.  Average appreciation for homes in Beaverton, Hillsboro, Tigard and Portland are similar are better than average US numbers.  Our current housing market situation is temporary.

• Investor cash flow

It’s not hard to find an investment home in Portland’s metro area.  Cash flow is looking better than it has in years.  Several homes in decent Beaverton and Hillsboro neighborhoods in particular offer great investing opportunities.  Highly likely that properties can cash flow with 20% down.  Real estate foreclosures are running high and, if you can tolerate the wait, short-sale situations offer fantastic value!

Talk with me today about buying or investing in Portland Oregon real estate.   Visit www.MaxwellSinclair.com for information and search Porland MLS listings.

Numerous buyers for properties that are a bargain

It’s interesting.  Listen to the local and national news coverage and you’d swear that the sky has fallen in the Portland real estate market.  Just this week I ran into 3 examples of properties where home my buyers saw value.  Two listed homes were short sales and already had offers on them within days of input into RMLS.  The third went into a sale pending status before they could even look at the house but RMLS had not yet been updated.  My clients were bummed.

This situation is not uncommon in today’s market.  Countless buyers are sitting on the fence waiting for that great bargain to come along.  Once it does, several of them jump on the opportunity and force a multiple offer situation.  Is our market really that bad?

Portland’s housing market is experiencing a significant adjustment

Home prices have slid in all areas.  Higher end locations like Lake Oswego, West Linn and Forest Heights are seeing adjustments back towards pricing seen in 2005.  Many of the homes in these areas are listed in the $600k price range.  A quick look at tax records will show assessor’s values over $750k.  Not that too buyers should be concerned with what the county thinks but rather note that home prices are adjusting from market peaks.  Looking at tax statements is one key way of evaluating home prices.

Prices have decreased 10% this year alone.  Recently I evaluated a Lake Oswego home for sale.  Sellers purchase the home in 2001 and were looking to relocate.  Taking a broader look at appreciation rates showed a tradational 6% overall increase (comparison of purchase price in 2001 to today’s potential sale price).  Buying in Lake Oswego proved to be a decent investment overall.

Unrealistic sellers need to lower price in order to compete

A huge factor in what’s driving down Portland real estate prices is the shear amount of short sale and foreclosed upon properties.  Banks actually taking homes back through foreclosure are very few, relatively speaking.  Owners who have the fore site to see their financial position may find it beneficial to do what’s known as Deed in Lieu of Foreclosure (give their house directly back to the bank).  This allows banks to unload homes quickly through the Portland MLS.

Whatever method is used to obtain the property doesn’t really matter.  Point is that bank owned real estate will be marketed at an aggressive price.  Benefit is to the buyer.  Buyers purchase properties at very attractive prices and are able to close within a standard 30 day period.  Short sale properties very often take 3 months to actually close, if they ever do.  Bank owned (foreclosures) and short sales are competing against the average seller, driving down their market value.  Sellers have to step up to the plate and lower their price to stay competitive!

Search all Portland Real Estate for sale at www.MaxwellSinclair.com

Today many search options are available online.  One of the easiest ways to start a home search is to use Google or another search engine.  Key phrases like Portland Houses for Sale will give a million results.  Most of which are Realtor sites or sites that link to major companies like John L Scott, Re/Max, or Prudential.

Here’s a bit of education that the average shopper may not be aware of.  Portland’s Realtors input listings of homes for sale into RMLS (Regional Multiple Listing Service).  Regardless of which company or agent lists the home information will be input into the same database, RMLS.  All sites showing on the results page from search engines get their data exported from RMLS.  You’re seeing second hand information.

What’s wrong with second hand information?  Nothing for the most part except that it’s not always complete.  Depending upon which website you’re searching results can differ slightly and in the end a house or two could be missed.  I’ve witnessed this numerous times over the years.  While some searches are very accurate some are out to lunch.

One of the best ways to make certain buyers end up with a complete list of houses available is to hook up with a Portland real estate agent.  Agents pay for access to the RMLS database and set up search parameters based upon input from their buyers.  Search results can be sent automatically as new properties hit the For Sale market.  Benefit is that you’re getting information directly from the horse’s mouth rather than second hand.

Additional searching on the buyer’s end is incredibly common, kind of human nature.  Outside of Craigslist or a For Sale by Owner site it’s all redundant searching.  Even these two websites generally have their listings already on RMLS.

Many buyers will insist on continued searching on their own, however, convinced that their agent could not possibly be sending all the listings.  When agents get specific information the search is set up based upon buyer-set parameters.  As long as given information is accurate, so are the search results.  But, garbage in, garbage out.  Problems occur when requests for house parameters are too specific.

The best thing you can do?  Give your agent a broad spectrum.  Instead of saying 1990 and newer homes only say 1985+.  Instead of saying 1800 sq ft 3 bedroom 2.5 bath, say 1700+ sq ft and leave it at that.  Much better to weed through a larger list of candidates and find that there’s a house with 2 bedrooms and a den that will potentially work than miss out.

Map searches of properties for sale are the worst.  A good number of listings can potentially not show up due to a couple of reasons; data export parameters from RMLS and inaccurate location information input by the listing agent.  Recently agents are required to verify gps mapping location on any new listing.  Some agents plain just don’t bother to make sure map location is correct.  This explains why clicking on mapping links occasionally puts a selected house in a completely different city.

Map searches are fantastic for getting an overall feeling of what sort of house prices are available in a specific area and getting ball park ideas.  Freely browse sites and search online for Portland homes for sale until you’re serious.  Then contact your agent to get the latest up to date selection near your target area.  You’ll be assured of seeing all listings!

Happy searching