Dear Lake Oswego Buyers: It’s Time.

I’ve never considered it part of my job description as a buyer’s agent to talk anyone in to anything. My job is to advise: to interpret needs and wants of every client, to find the homes that fit those needs, to negotiate an equitable and binding sales agreement, then to see the process through to closing. I don’t think I’ve ever had to manipulate someone into making a buying decision he or she was clearly not ready to make.

But in the last year or so indecision has evolved into an art form. There are certainly some legitimate reasons: Inventories have been rising, sellers have been reticent to price realistically, and every day brings a new round of “Housing Market DOOOOOOOOMMED!” headlines, understandably driving buyers to the sidelines until some sense can be made out of the mortgage sub-prime /liquidity /standards /foreclosure mess. That, of course, exacerbates another round of headlines, leading people like CNBC’s Jim Cramer – a buffoon who, as Greg Swann points out, screams for a living on cable TV – to declare on the Today show last week: “Don’t you dare buy a home now. You’ll lose money.” He did amend that the following day on CNBC, exempting Seattle as the one area where prices aren’t dropping, his fact checkers not digging quite enough to know the same is true of Portland and a high percentage of the Pacific Northwest. [I’m not sure that mattered much; more people read BHB on a given day than tune in to that particular network.] It's a barely meaningful statistic anyway: because LO showed last month a 6.3% appreciation does not mean an individual home will sell for 6.3% more than it did a year ago - it emphatically won't - nor does it mean that in a market where there's a 6.3% depreciation that a home will sell for 6.3% less. There are simply too many variables.

So in keeping with the all real estate is local axiom, there’s a temper shift emerging in Lake Oswego, the local market with which I’m most familiar. [Thus: it may be true of the broader Portland Metro market as well; I haven't run the numbers.] Here’s what I see:

1. Inventories are down from thirty days ago, after a steady and dramatic rise over the last nearly two years. I’d love to say that’s because of sales – it’s not; September sales were down over 30% compared to September 2006. It’s because fewer listings are coming on the market, listings are expiring and not being relisted, or listings are being canceled or withdrawn. Those are the sellers who don’t have to sell immediately or who have decided to enter the rental market, sellers who on average kept their prices artificially high.

2. Many of the remaining sellers are motivated, moreso than ever. Sellers in large part have listened to their agents and had their homes put in turnkey condition with necessary repairs and upgrades. Now they’re further motivated by wanting to sell before the winter doldrums; list prices are dropping rapidly. Buyers are finding very, very nice homes at very, very attractive prices.

3. There’s still a lot from which to choose: As of yesterday there were 100 single family homes listed for under $500k [Note to those reading from outside the area: median price in LO is nearly $500k]; 205 between $500k and $1m; and 126 over $1m. And note only a very small percentage are selling for full list price.

4. The mortgage liquidity crisis is about over, and rates remain at historic lows. This does not mean we’ll return to the days when to get hundred percent financing all you had to do is prove you could breathe, but if you have good credit and 20% down you can own the market. [Obviously there are still many loan products available for individual circumstances; consult a mortgage professional.]

Final thought: all these reasons triple if you’re looking to buy a home to live in for five years or more, to raise a family or retire, rather than simply looking at it as an investment.

A home is, after all, first and foremost a home.

Jim Cramer notwithstanding.

Rates DOWN. Confidence UP.

Jeff Brown wrote a brilliant piece on Bloodhoundblog yesterday. Read it all - and the comments as well. This kind of thinking is the reason I read blogs, especially BHB. Key graphs:

I can’t find a two week period in the last 40 years where the Fed has increased money supply by over $110Billion — can’t find it. That doesn’t mean it hasn’t happened, but you have to agree, that’s a monster increase in our money supply. (That’s M2 for the econo-nerds.)

This move will, (I theorize) spur the stock market — and please believe me, I don’t say this lightly — to heights we haven’t dreamed of. That kind of added liquidity in this set of circumstances relegates whatever Bernanke chooses to do with interest rates tomorrow — anticlimactic. The only argument that makes rate cuts more likely than not, is the absolute requirement of — confidence.

Confidence? No kidding: DOW up 336, 2.51%. Investors were tickled to death with the half point cut in the federal funds and discount rates. Sure, one day does not a rally make, but the drop in the DOW a few weeks ago when the sub-prime problems were fully felt foretold nothing but gloom, so I’m going to exercise prerogative and give tickled where tickled is due.

What’s this mean for the housing market, particularly the housing market in the Pacific Northwest? It should help ease the coming interest resets for adjustable rate mortgages. Whether or not it will affect mortgage interest rates is questionable; there’s no direct correlation. That said, the thirty year fixed dipped below 6% for a time last week, and jumbo mortgages (+$417k) are starting to settle.

As I’ve argued before the fundamentals remain strong.

So what’s the real effect? Perhaps, as for the stock market, this is a catalyst for the one thing this housing market has lacked:

Confidence.

'Green, Green' Redux

Back in March I wrote this about the then new ‘green’ search filter on the MLS. Dylan Rivera of The Oregonian had written an extensive – and breathless – piece about its rollout: “Environmentally friendly information for Realtors signals good news for some buyers and sellers and starts a trend.” was the subhead.

Since our MLS is one of the few in the country to have the filter, here, for the benefit of those around the country considering the add-on, are the six month numbers from one of the greenest cities in the US:

Total active listings, Portland Metro: 16,108.
Total listings labeled ‘green’: 451
Or 2.8% of the total, where it’s been for the last four months.

But what about buyers? Only new construction is available for a green cert, and builders may, in this market, be reluctant to add the cost if that cost can’t be recovered. If the incentive is meaningful certified properties should sell at a higher rate:

Total sales, last six months: 16,016.
Total green sales: 296, or 1.9% of the total.

Apparently not a trend quite yet…

Twenty Year Trend: Portland vis-a-vis the US

The NY Times has an interactive graph displaying a twenty year growth trend – both actual and inflation adjusted – in housing prices for nineteen US markets. See here. [Thanks to Dave Koch of RE/MAX for the link.]

For the moaners among us – and I catch myself in that category occasionally – it’s eye opening, and comforting. With the exception of Atlanta, which is missing five years of initial data, Portland is the only market that hasn’t experienced a quarterly downturn in actual growth. We haven’t experienced the wild peaks and valleys of, say, a Phoenix or Las Vegas, and Portland and Seattle remain among the most healthy real estate markets in the United States.

That’s not to say it can’t happen; in August inventories continue to climb and sales slide. But even with that both the average and median prices are up considerably across the broad metro area.

The fundamentals remain strong.

How to Write Imperfect Copy

One of the most difficult tasks in writing is that of writing copy for catalogues, newspaper ads or, well, MLS listings. It’s important to capture attention and tell a story, but character limitations make that difficult, which is why you often run across sentences like “Stng 4br clonl, chrm thruout w/trfc vu of Hd.” As much as I love to write, I admit to being not very good at the task; there are only so many ways to say “Pottery Barn cute!”, and there are only so many synonyms for “coveted”.

But there is – or should be – an inviolable rule: proofread. I came across this this morning:

"Brick front introduced gracious Georgian. Designer Upgrades! Wainscotion, bay windows, island kit, brfst nook, 2 wood burning fireplaces, picket fence backs to manicured greenway. Coverted Oak Creek School. A sence f style embraced by a Spirit of Tradition! No Sign on Proptety."

To me – and I’m priggish when it comes to spelling and grammar, but so are many others – that’s like fingernails on a blackboard. What’s being said disappears into how badly it’s being said. It reflects not only on the writer – who is either magnificently dull or, as I suspect here, careless and inattentive – but on the listing, a $760k home. The listing is five days old, which means the agent hasn’t checked it once posted, and the seller either hasn’t been given a copy – sellers, always get a copy of your listing and check it for errors – or hasn’t bothered to read it.

This is a market where in selling a home – especially in that price range – everything matters, little and big.

Nf sd.

Realtors' Dilemma

I’ve written a couple times on BloodhoundBlog about the need for the real estate industry to divorce the buyer agent commission from the listing agent commission. With the seller still in control of what both agents earn, but the buyer bringing the money to the table, we’re living under the vestige of sub-agency, where everyone in effect is working for the seller. It’s otherwise codified in both Oregon Statute and the Code of Ethics – we owe fiduciary duty to whomever we represent, buyer or seller – but I learned long ago that, with market forces in play, saying isn’t always doing.

Case in point: We had an office discussion yesterday that began with how best to market listings when inventories are fifty percent higher than a year ago. Even with all the right ingredients – right price, top condition, good staging, easy access – given all the choices buyers have it’s sometimes difficult to get showings. What to do?

One suggestion: Raise the Buyer Agent commission. From, say, the average 2.7% to 4%. Considerably cheaper for the seller than lowering the price another $20k.

But, wait. That runs counter to statute and code. As a buyer’s agent I’m bound in all cases to consider my buyer’s interests ahead of my own. A home that’s not right at 2.5% doesn’t suddenly become more attractive at 4%. Could anything like that actually work?

Yes. Sadly. It works. And we’re seeing it used as a tactic more and more often.

It’s comforting to know that everyone in the room was as passionate as I: Not only has the buyer commission never entered into a decision on what to show or not show a buyer, but the suggestion that we’d be thus encouraged is a rank insult. Most felt that any buyer agent bonus needs to be disclosed to the buyer, and if possible manipulated so that it becomes in his or her interest.

Then the conversation turned to the dilemma: As a listing agent my fiduciary duty is to the seller. If more traffic can be generated by bribing my fellow agents, is suggesting that to the seller the right thing to do? Does the duty to my seller trump the cynical feeding of the venal realtor stereotype?

I honestly don’t have an answer. I have a fabulous listing in Lake Oswego - where there’s about an eleven month inventory of homes in the $500k and up range - that would be a perfect candidate for a trial … but neither I nor the sellers are quite ready for that. Much better, I think, to hold the commission where it is and try to find incentives to put in the buyer’s pocket.

In the meantime, I’ll continue to write about divorcing commissions.

Perception is NOT Reality

Back when I was still in the shoe business a friend – and terrific retailer – leased a small space in Washington Square Mall. There weren’t more than ten chairs; he could have three people in the store and it would look mobbed. Business was fabulous, growing at double digit rates.

When a neighboring space came available, he took advantage and nearly tripled his footage, adding commensurately to the inventory. He hired more people and prepared for a windfall.

But: His sales immediately dropped. He found that even with ten people in the store after the addition it looked empty: the smaller space created a buying frenzy, the larger buyer skepticism, skepticism additionally fueled by too many choices. He was still offering the same quality product and service, but the perception had changed, and he had to close the door within a year.

That’s the best allegory I can think of for the current real estate market.

The economic fundamentals are still in place, and mostly good. More people are moving into than out of the Portland Metro area, unemployment is low, the economy is growing, and interest rates, though higher than a year ago, are still historically low. Home values are appreciating, though at a slower rate than the last three years. Skittishness has hit the mortgage markets – fallout of the sub-prime failures – nearly panicking the Oregon senate into a poorly thought out remedy, but what’s happening here is nothing when compared to most of the rest of the country. In reality this is a good market.

But perception has changed.

It’s the negative that gets all the press, and buyers have turned seriously skeptical. Two years ago was the frenzy: buyers thought if they didn’t buy now! they'd overpay. Today the fear is if they do buy now … they’ll overpay. Agents have watched this for several months: people walking away from $10,000 in earnest money the day of signing because it ‘just doesn’t feel right’, buyers faced with a confusing array of choices, so many any choice is permanently postponed. On the other side sellers are anxious to get their homes on the market for fear the market will begin to drop.

And in a self-fulfilling sort of way, they’re all right, and the stats are beginning to catch up. At the end of June the Portland metro area had 57% more active listings than a year ago. Year over year sales were down almost 20%. Median and average sales were up year over year – 5% and 6% respectively – but down slightly over May’s median. Both median and average prices of active listings are down and will be reflected in sales shortly. Etcetera.

Does that mean it’s a bad time to be buying or selling?

Absolutely, unequivocally: No. It requires patience, reasonable pricing and excellent presentation on the selling side; a knowledge of the market and market history on the buying side. Homes are still selling, and there are many, many good bargains for buyers if you don’t let emotions fog the decision.

To wit: I helped a buyer a few months ago find a home in Lake Oswego. It took five months of ‘Should I or shouldn’t I?’, but we finally found exactly what she wanted. It was an older listing, had started at $456k, was now listed at $430k. She loved it, offered $400k…and it was accepted, an exceptional, exceptional value. In the first week we made it through a very clean inspection. The seller was gracious enough to begin what few repairs there were to do even before the inspection addendum was written. But she began looking for things to be wrong, finally settling on – ‘It just doesn’t feel right…’ – and backed out.

Epilogue: the home sold the next day for $420k.

Point:

All the happy spin in the world isn’t going to change the current perception; that’s going to require a couple months of diminishing inventory.

But don’t allow that perception to keep you from buying or selling! If you know what you’re doing – or hire an agent who does – you’ll do juuuuust fine.

Taxes, Zillow and the Price of Homes

I have a listing in Marion County. New construction, but when I entered it into the MLS the address didn’t match the tax id. The seller had been receiving tax statements, so I couldn’t figure out the why.

Called the county. Pushed the required numbers in order to talk to the required three people, finally landed at the map room. “Oh! By golly, looks like I entered the lot number instead of the address!”

That was nearly four weeks ago. Tax id and address still don’t match.

Pause here to note that that is one of the organizations Zillow relies on for accurate market information.

But this isn’t about Zillow.

I received an email a couple days ago on a listing I have on Craigslist. He or she – it was anonymous except for the email address – was wondering why the list price was so much higher than: the market value according to the county.

Oh, dear.

This led to an exchange where I tried to explain that the Market Value as assessed by the county – and it doesn’t much matter what county – only exists to make Zillow look somewhat accurate. There’s exactly zero correlation between assessed market value and sales price. I even sent this person county value/sales price ratios from within a mile of this home over the last three months: 57%, 15%, 25%, 27%, and – 7%. I pointed out the home was listed with the county as a single story five bedroom; it’s actually three stories and four bedrooms. I explained that if he were to do a search of every home 3900 to 4100 sf (this is 3997) listed or sold in Lake Oswego in the last year, this would be the least expensive, and it’s not a fixer, it’s completely updated on a quarter acre. Perhaps he should see it?

No deal. The county was his number and he was sticking to it.

Oh, well. The real value of any home is the price a seller is willing to accept and a buyer is willing to pay. In any free market he’s absolutely sanctioned to make decisions on whatever criteria he thinks work, be it horoscopes, numerology, crystals, or county assessments.

My suggestion, of course, is: hire a good agent.

The Value of Us Pt 2: A Day in the Life

Good heavens, where have you been?

Earning a living! Busy time of year.

Give. Me. A. Break. Everyone knows realtors work two days a week – half days at that – and make in the high six figures. That’s why, frankly, I deserve some of your commission.

Oh, dear. You of all people are buying into that?

Are you denying it??

Of course! But only on the basis that it’s nonsense.

HAHAHAHA! I know work; try wearing this hat all day! Here’s your test: what did you do, say, yesterday?

Made a flyer for a new listing, just like Sixty Minutes said.

SEEE?? I was right!

Well, not quite. That was from about 7am to 8am, if you include the time it took to print one color copy for duplication. Note I’d already spent about a week and a half with the seller – a good friend – prepping the home, taking the pictures and getting it ready to list.

Then you took the rest of the day off?

Then I drove to the RE/MAX office, met up with another realtor who I’d asked to co-list with me. The home’s in an area I’m not familiar with and overlaps another MLS; she knows the area well, is a member of the other MLS, and it’s worth half the commission to give the home every chance to sell.

Heyyy, that’s my commission you’re giving away!

After we made copies of the flyer, we took the hour drive to the home, walked it for another hour making notes, putting up signs and lockboxes, and talking marketing strategy. Then we drove back to the office.

Just in time to get in eighteen holes!

Right. Just in time to spend a half hour on the phone with the county to try to get the tax id and address to match – the map room had entered the lot number instead of the address, throwing off every site that tried to link to it. Time to enter all the info and data into the MLS, time to write and post ads on Craigslist, Zillow and Trulia.

Time to follow up on an inspection report and a foot-dragging lender regarding a property in escrow, a property sold to wonderful buyers with whom I’ve worked for over a year to find just the right home. Now that they’ve found it, they’d like no glitches. Time to rewrite and repost copy for another listing. Time to parry silly requests from a listing agent on another home in escrow, requests that would only annoy the buyer I’m representing. Time …

OKOKOKOKOKOKOK! I get it! You had a busy day! So what’d you do Sunday?

Before or after the three hour open house?

I take it I don’t get any of your commission?

I – and every good agent I know – will do anything and everything possible to see that you get the very best representation you could possibly get. Everything, that is, but give you my commission.

I'm convinced!

Of course you are; you're my adorable adopted granddaughter!

The Bloodhound In Me? No. The Me in Bloodhound.

I've linked often here to Bloodhound Blog in Phoenix. Not only is Greg Swann, the site's author and moderator, one of the best writers in or out of Real Estate blogging, but he has some of the best insights I've found into the business of buying and selling homes. More, he's surrounded himself with other seriously bright people from all phases of the business: Mortgage brokers, investors, as well as other RE brokers, both new and hugely successful. I get more useful information in a week of reading BHB than in the entire 150 hour course taken to get a license.

So I was drop-dead astounded a couple days ago when I got an email from Greg – it sat in my spam filter for thirty six hours before I actually saw it – asking me to join the group. Humility isn't one of my great strengths, but what in the world can I offer to people who've taught me so much?

Well, we'll find out. I of course accepted, and will be posting there as regularly as time allows, hoping to add whatever I can. What I've found refreshing already is that Greg, true to his free market aesthetic, doesn't set any constraints on what's said or when it's said. This isn't the equivalent of an internet group hug. People are passionate about their thoughts but reasoned in their passion. Who knew real estate could be so incredibly interesting?

So, thanks, Greg. It's going to be great fun.