Tough Portland housing market stymies first-time homebuyers

Summary: Claire Anderson of Portland has a well-paying job at a local nonprofit, and she’s socked away thousands of dollars, but she still can’t find a home to buy in her price range. Portland’s stock of homes affordable to moderate-income first-time buyers is disappearing amid rising prices that have outpaced wages. April 18, 2017 Beth Nakamura/Staff


Though it seemed unlikely, Claire Anderson couldn’t shake the notion her real-estate broker had taken her to the scene of some terrible crime.

They’d crossed an unkempt yard to enter the rundown Southeast Portland home through a back door. Inside, splotches covered the walls and ceiling. The lights flickered gloomily.

“It was the creepiest horror scene,” the 29-year-old said. But “we still walked around and talked about what we could do to make this horror movie house work.”

That’s because after touring more than a dozen homes and trawling hundreds of others online, she could no longer automatically dismiss a house with an “Enter at your own risk” sign tacked to the front door. Not for her first home, and certainly not one within her price range.

The starter home has become an endangered species in Portland’s robust real estate market — even for middle-income earners with decent savings like Anderson.

Inventory in the ballpark of $300,000 is rapidly disappearing as prices far outpace wages, a scenario exacerbated by the continuing fallout of a homebuilding drought, the region’s surging population and the tendency of current homeowners to stay put instead of move up.

And rising interest rates threaten to further erode buying power, leaving first-time home buyers with even fewer options.

More competition, fewer homes

Portland has long held strong appeal for its relatively low cost of living — a West Coast outpost without Seattle- or San Francisco-level rents, where artists, entrepreneurs and working-class people could build a life and perhaps buy a home.

But homeownership has increasingly become out of reach in the metro area. Data from the real-estate firm Zillow show just 61 percent of today’s housing stock is affordable for median-income earners — around $64,000 today — compared with 76 percent in 2000.

That would put today’s share of affordable homes near levels last seen before the housing bubble collapsed in 2007-2008, and ushered in a wave of foreclosures and the financial crisis.

But today’s unaffordability is driven by a shortage of homes, both for sale and for rent. There’s also been far less construction of new homes as developers work to bring more rental units online.

Flash sales and bidding wars are no longer anomalies in the metro area, in large part because there simply isn’t much to choose from. A mere 3,300 homes were listed at the end of February, according to the Regional Multiple Listing Service, or a six-week supply based on current trends. A more typical market would have a six-month supply.

Homeowners, seeing little reason to subject themselves to the stress and expense, are loath to re-enter the market

“People are buying their ‘starter home’ and living there forever,” said Alyssa Isenstein Krueger, a broker with Living Room Realty in Portland. “They don’t see themselves as being able to make the leap to the next level, so there’s less turnover.”

As a result, small homes in desirable neighborhoods are seeing prices bid higher. In many cases, first-time buyers are competing with investors, flippers, developers and other cash buyers.

Home sellers usually will opt for the cash offer, which promises certainty that someone in need of a mortgage can’t provide. And developers often bid more than the house is worth because the bigger one they plan to replace it with will fetch a much higher price.

As a result, first-time homebuyers are looking farther from the city core to find affordability and less competition.

The Portland Housing Center, a nonprofit that works with first-time homebuyers, has sought to meet that need with new satellite offices in Beaverton and Vancouver.

“For a while the suburbs were the place to go,” said Felicia Tripp, the center’s deputy director. “But the inventory shortage is Portland metro-wide. It’s going to be difficult, even in the suburbs.”

Rising mortgage rates

What starter homes are available, however, remain within reach only because of low mortgage rates, which can dramatically affect monthly payments. But mortgage rates have been creeping higher. In March, the Federal Reserve raised its benchmark rate for only the third time since the Great Recession, and most observers expect the central bank to raise rates at least two more times this year.

Should rates rise to 2006 levels — about 2 percentage points higher than today — the share of affordable homes would drop to just 41 percent, the Zillow data show. Such a jump could add nearly $300 to the monthly payment on a $300,000 home, and that’s without any increase in price.

Most forecasts call for a more modest rate increase over the next two years, but prices are expected to keep growing. The median Portland-area home price jumped 10.4 percent in March, year over year, and has surged nearly 72 percent since 2012, RMLS data show.

Such a dearth of starter homes is something the Portland real-estate market has never seen before, Tripp said.

“We’re bracing,” she said. “There’s always been, generationally, a market for first-time homebuyers. This is new to us.”

Anderson, the would-be homeowner, considers herself relatively lucky.

She has a job at a Portland nonprofit that pays well enough, and her rent held steady long enough that she could save up a healthy down payment. Her family can also contribute — increasingly the norm for first-time homebuyers.

And there’s no big rush, such as an expiring lease. But her relatively low rent recently jumped $200 a month, and the prospect of future increases might force her to find a different line of work, or leave Portland.

“It may be that I don’t find anything. Then we rent as long as we can, and then,” she said, “I don’t know.”

-From OregonLive

William


Posted on April 27, 2017 at 5:33 pm
William Gilliland | Posted in Uncategorized |

Home values will soar in these 40 Portland neighborhoods…

If you own your home, you’re wondering how Portland’s skyrocketing sales are impacting the value of your place. If you don’t yet have a mortgage, but hope to, you may want to figure out which neighborhoods will take off this year.

No one can predict the future, especially when it comes to real estate investments, including sentimental properties such as your family home. But the data czars at Zillow crunched numbers at our request and came up with a ranking of what they predict could be the hottest Portland neighborhoods over the next year.

Scroll through this photo gallery to see the top neighborhoods.

They compiled the current median home value of each neighborhood, forecast the value in a year and calculated the percent of the increase. For example, the median home in the Southwest Hills could cost 3.8 percent more over the next year, bumping the cost up more than $36,000.

Topping the list with a predicted 5.2 percent jump: St. Johns (expect to pay a median extra of $17,539), Mount Scott ($18,412 more) and Brentwood-Darlington ($15,634 more). See other predictions on how homes in specific neighborhoods might appreciate.


Posted on April 5, 2017 at 7:26 pm
William Gilliland | Posted in Uncategorized |

Oregon’s massive housing subsidy to the well-off deserves legislators’ scrutiny

As public policy goes, the state’s home-mortgage interest deduction that helps shrink Oregonians’ tax bills flunks the test of public benefit.

The practice, which allows homeowners to deduct the amount of annual interest they pay to mortgage lenders, will cost Oregon nearly $500 million in lost revenue this year. The subsidy largely benefits higher-income tax filers who are more likely to itemize their deductions and who are the ones securing larger mortgages in the first place. Renters, who arguably pay property taxes just as homeowners do through their rent payments, get no similar benefit.

It’s irrational, and several states, including Massachusetts, New Jersey and Ohio, don’t allow taxpayers to deduct it in computing their taxable income for state purposes. But will legislators have the stomach to revise this practice?

 Despite the inevitable blowback, legislators should take on this challenge. With Oregon HB 2006, a bill sponsored by the House Human Services and Housing committee, lawmakers have the opportunity to at least start the work of breaking down resistance and educating the public why this deduction is not in their or the state’s interest. While imperfect, the bill offers some reasonable proposals for curbing an excessive giveaway that this state can’t afford in the face of far more pressing needs in housing and elsewhere.

 

The bill calls for capping the amount of mortgage interest that someone can deduct on their state tax returns to $15,000. That’s well above the average deduction claimed by the nearly 500,000 filers who submitted itemized returns in 2013, according to the Oregon Department of Revenue’s most recent tax expenditure report. It also calls for eliminating entirely the deduction on second homes. In addition, anyone whose adjusted gross income is $100,000 or more (or joint filers earning $200,000 or more) would not be allowed to claim any mortgage interest deduction for state tax purposes. The proposed changes would not apply to the mortgage interest deduction on the federal level.

The Legislative Revenue Office has not yet analyzed the proposal. But the Oregon Center for Public Policy, one of the members of the coalition that developed the proposal, estimates it could bring upwards of $200 million or more per biennium for the state, Juan Carlos Ordonez, spokesman for the center, told The Oregonian/OregonLive Editorial Board. That money would then fund assistance for down payments, initiatives to build starter homes and other programs that increase the supply of housing, said Jes Larson of the Welcome Home coalition, another member organization of the network behind HB 2006. Addressing supply is key – there is no way to legislate our way out of this housing crisis if nothing is done to significantly increase the inventory of places for people to live.

That said, this bill is far from perfect. The revenue office’s vetting could change some of the projections. And other provisions, such as the arbitrary $100,000/$200,000 income cut off could be problematic. While Ordonez maintains that six-figure Oregonians can easily absorb the hit, his conclusion seems driven by assumptions that anyone of that income level is immune to financial strain and can adapt in a heartbeat. Good public policy calls for objective consideration of how best to limit fallout when longstanding rules suddenly change.

Yes, mortgage interest deductions are a form of welfare for the better off. But the threat of immediately revoking it from people who may have based significant financial decisions on the promise, is bound to trigger unintended consequences. Not the least of which might be sparking opposition from those who might otherwise support the $15,000 cap. And this proposal needs all the support it can muster.

Legislators also must recognize the multi-faceted budget disaster that Oregon faces. While the mortgage interest deduction is a worthwhile debate, they must also confront thornier issues as easing the public-pension burden on public employers and raising new revenue from businesses.

Oregonians can be stubbornly protective of irrational, nonsensical policies that mask their destructiveness with short-term sweeteners (see: personal kicker rebate). That does not give legislators a pass on addressing it, however, particularly when the state faces a $1.6 billion budget deficit. Start the work toward a saner system, pair it with real change on pension reform and corporate taxation, and show Oregon what true leadership and progress looks like.

Let me know if you have any questions!

William

 

 From The Oregonian/OregonLive Editorial Board 


Posted on March 21, 2017 at 8:08 pm
William Gilliland | Posted in Uncategorized |

The Annual Profile of Home Buyers and Sellers

Happy Wednesday, Folks!

The National Association of Realtors® recently published their annual profile of home buyers and sellers. This report provides insights into the unique buyer/seller experience from YOUR perspective, as well as emerging trends. It covers information on demographics, housing characteristics and the experience of consumers in our housing market.

While I am not allowed to share the 144-page report in its entirety, here is a great overview that provides some helpful highlights.

Let me know if you have any questions!

-William


Posted on February 22, 2017 at 7:01 pm
William Gilliland | Posted in Uncategorized |

Can You Guess What the PDX Median Sales Price was in 1960?

Can you guess?

We sure do love historical statistics that prove how amazing an investment real estate can be.

It’s our sincerest belief that every family in America who otherwise saves for retirement should also consider owning a rental property….and the historical statistics sure do seem to support this belief.

Below is a link to the Portland median selling price back to 1960.  Check out what happens reliably every decade for the last 56+ years.  Also consider that at the end of every decade (just like some of our clients now), there were most likely those who believed prices had moved up so much in the last decade that they couldn’t possibly increase in the future.

Boy were they wrong!

PDX Median Sales Prices 1960-Present

Want to know how much YOUR home is worth? I’m simply an email or phone call away.

Sincerely,

William.


Posted on February 14, 2017 at 10:59 pm
William Gilliland | Posted in Uncategorized |

The Windermere Foundation

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Dear Clients and Friends,

Thanks to continued support, the Windermere Foundation has raised over $33 million in total donations since 1989. These donations have helped us support many local non-profit organizations over the years, which provide services to low-income and homeless families. Organizations like Project 150, which provides food, clothing, school supplies, and scholarships to homeless, displaced, and disadvantaged high school students, to help them stay in school and graduate.

“Thomas” was going to graduate high school with honors, but wasn’t planning to walk at graduation because he didn’t have a cap and gown. He had been living in a weekly-stay motel with his two younger siblings for six months, after their mother left them. With funding from the Windermere Foundation, Thomas, along with 40 other students, received a cap and gown and other needed supplies through Project 150, and was able to walk at graduation with his classmates.

Although the Windermere Foundation has helped many families have their most basic needs met this year, many more children and families in our communities still need your help.

There are only five days left in this season of giving to make a special gift to the Windermere Foundation. Any gift received before December 31 will be counted towards the 2016 tax year. More importantly, your gift will directly help local children and families in need.

Can I count on you to make a gift today?

100% of your gift will be used to help people in your community. In doing so, you will provide additional life-changing help to the same organizations that your office already supports.

Your financial gifts to the Windermere Foundation truly make a difference in the lives of others.

Make a gift today online or by mail to Windermere Foundation, 5424 Sand Point Way NE, Seattle, WA 98105. If sending your gift in by mail, it must be postmarked by December 31 in order to be counted towards this tax year.

Thank you for your generosity and compassion.

Sincerely,

William Gilliland


Posted on December 27, 2016 at 9:07 pm
William Gilliland | Posted in Uncategorized |

Zidells unveil their latest designs for the South Waterfront!

zidell yards

It’s of course just a vision at this point, but what the Zidell family and its team of designers and planners have conjured up for their 33 acres of property is, to say the least, expansive, sweeping and head-turning.

Renderings that are part of a recently completed master plan — all conceptual at this point — show a bustling riverfront in the shadow of gleaming new office and residential towers. Public plazas and restaurants teem with people, OHSU’s tram soars overhead and elements of the property’s former use as a barge-building and ship-dismantling facility tie in with the new development all around.

zidell close

And, in what could be the most intriguing image of the lot, the former slip where Zidell for decades launched its giant barges into the river, gets transformed into a public river access point, where paddlers launch kayaks and canoes, sunbathers take in the rays and swimmers plunge into the water of the river and a cordoned off pool.

“It’s a great access point for the river and a great opportunity that just hasn’t been there before,” said Tom Henneberry, chief operations officer for ZRZ Realty, the real estate arm of the Zidell family’s company.

ZRZ was scheduled to go before the Portland Design Commission today for an initial preview of the Zidell Yards master plan, which has been in the works for the bulk of this year. Inclement weather postponed that meeting, but Henneberry provided a snapshot of the plan, including the renderings, to the Business Journal.

zidell sunset

zidell views

The grand vision for the Zidells’ 33 acres could, at full build-out, bring in 15 to 20 new buildings and up to 5 million square feet of mixed-use space, including residential, office, retail and a hotel. That square footage would also include more than nine acres of public park and open space, much of it designed to offer a closer connection with the Willamette River.

“We are all about activating the river and getting people used to getting a little closer to it,” Henneberry said.

The master plan envisions 1.5 million square feet of office space, 2,600 residential units and about 250,000 square feet of retail and restaurant space. One building would be anchored by a grocery store, an amenity that’s long been missing from the South Waterfront mix. The plan also includes some 5,500 parking spaces and four parks — including one under the Ross Island Bridge — as well as more of the existing greenway along the river.

The plan also includes infrastructure projects, including road extensions, that would be required to bring some of the development to fruition.

Much of the design thus far has been done by GBD Architects, PLACE Landscape Studio and Moffatt & Nichol.

Henneberry said that Zidell Marine is on track to complete its final barge on the property by the beginning of June. After that, early infrastructure construction could begin in the later part of 2017, followed by potential office or mixed-use projects breaking ground by late 2017 or early 2018 depending upon the array of normal development variables.

zidell birdseye

-PBJ


Posted on December 21, 2016 at 1:17 am
William Gilliland | Posted in Uncategorized |

PDX Celebrity Real Estate: Kevin Pritchard

Ex Trail Blazers GM Kevin Pritchard sells Lake Oswego villa for $2.3 million.-1bc49167dbe2bfa4

The Lake Oswego house was modeled on villas he saw on Italy’s Lake Como, where the 6-foot-3-incher played professional basketball early in his career.

Few firings are as heated – and public – in real life as they are in sports. Players, coaches and execs are critiqued on a daily basis by fans and bosses. And when missed plays and losses add up, someone gets the boot.

What happens to the former team member’s home? It becomes part of the exit plan, and sometimes it’s sold quickly and at a loss.

Unless you’re former Trail Blazers general manager Kevin Pritchard, now an executive with the Indiana Pacers, who sold his Lake Oswego waterfront villa for $2.3 million in June, six years after getting fired.

He bought the estate on Oswego Lake for $1.6 million in 2007 and spent two years transforming it into a three-level Mediterranean mansion modeled on villas he saw along Italy’s Lake Como, where the 6-foot-3-incher played professional basketball early in his career.

Pritchard hired Terry Sprague of Luxe Platinum Properties/Christie’s International Real Estate to represent him when he bought and then sold the property.

The name of the estate: Tre Cascata, which is Italian for “three waterfalls.”

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Visitors see a cascading waterfall when they enter the courtyard. But most memorable are three levels of hardscape patios that overlook the main lake. One outdoor living space has a stone fireplace and connects to a boat house.

The main house has four bedrooms, 3 1/2 baths and 3,362 square feet of living space. The one-bedroom, one-bath guest house has 709 square feet. There’s room in the garage or courtyard to park eight cars.

In 2010, the Portland Trail Blazers fired Pritchard after six seasons with the team, and he packed up but kept his place.

He put the estate on the market for close to $3 million in 2011, then dropped the price to $2.795 million, according to public record. He rented it for about $7,000 a month to athletes and others. Then relisted it in 2015 for $2.595 million. A few offers didn’t close, so in in April 2016, he raised the price to $2.695 million.

The $2.3 million final price breaks down to $515 a square foot, which is a big jump from the median price per square foot of $293 in the 97034 zip code, according to the real estate database Redfin.

The estimated monthly mortgage of $8,700 includes property taxes, which total $24,157 a year.

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William Gilliland

-Article from the Oregonian


Posted on December 9, 2016 at 9:37 pm
William Gilliland | Posted in Uncategorized |

My Listing: Featured in the Oregonian!

Post-election mortgage rate surge unlikely to dampen housing appetite in Oregon, experts say

http://www.oregonlive.com/business/index.ssf/2016/11/portland_housing_unlikely_to_f.html

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Donald Trump’s surprise presidential victory triggered a sudden and unexpected increase in mortgage rates, but those higher home loan costs aren’t likely to cool prices in the red-hot Portland housing market.

The average interest rate on a 30-year fixed-rate loan has climbed to 4.10 percent, the highest since July 2015, according to MortgageNewsDaily.com.  That’s up by about half a percentage point since the Nov. 8 election. The rate of increase matched that of the 10-year Treasury yield, which rose after investors moved billions of dollars from bonds into the booming stock market. Changes in the two rates typically track together.

The Portland area’s housing market has been one of the nation’s strongest this year. It’s topped a list of 20 peer metro areas in year-over-year price increases for nearly a year. Homes routinely sell in a matter of days or weeks rather than months as buyers compete for the slim supply of homes for sale.

The mortgage rate increases aren’t likely to break the pattern of strong price growth. What’s driving housing demand is job growth, which is bringing new workers to the metro area; generally rising wages in all income categories; and a tight housing supply, said Tim Duy, a University of Oregon economics professor and director of the Oregon Economic Forum.

With those market forces, “we’re seeing exactly what you would expect to see,” Duy said. In order for price increase to cool, he said, “we’ve got to be able to build ‘up’ faster and ‘out’ faster, and we’re not doing either.”

Marc Fox, principal broker for Fox Real Estate Network/Keller Williams Realty, said the rise in rates could have the counterintuitive effect of priming the market in the typically slow holiday and winter season.

“We’re starting to see some buyers get off the fence,” he said.

Mortgage rates spike

The average for a 30-year fixed-rate mortgage has climbed nearly half a percentage point since the Nov. 8 election. The Federal Reserve has signaled that it’s likely to raise its benchmark rate soon.

mortgage rates

Though financial markets remain unpredictable as investors try to sort out Washington’s new priorities, analysts say further interest rate increases could be in the offing.  The Federal Reserve Bank hinted recently that it could raise its benchmark federal funds rate next month. That interest rate doesn’t track with mortgage rates as directly as the 10-year Treasury rate, but an increase would signal another move out of the extraordinarily low interest rate environment of the post-recession era.

David Blitzer, chairman of the committee that produces the monthly S&P CoreLogic Case-Shiller Home Price Index  the 20-city survey that Portland has topped for 11 consecutive months doesn’t expect the latest interest rate increase or further modest increases to dampen housing’s recovery.

“The rates are still lower than most people have ever seen them,” he said.

Borrowers on the cusp of being able to afford a home can opt for variable rate loans or other cost-cutting mortgage options if rates get too high, he added.

“There’s lots of room to dicker,” he said.

Portland continues to show the strongest growth in home values of the 20 cities in the Case-Shiller index, which measures relative price changes using repeated sales of the same homes. That increase is more than double the 5.1 percent home-price appreciation for the 20-city composite.

“It seems that everyone wants to move to Portland, Oregon,” said Blitzer, a New Yorker. “I’m not sure why.”

The RMLS multiple listing service, another measure of housing demand, reported that the median Portland-area home sold for $350,300 in September, an increase of 15 percent from a year earlier. The inventory of homes for sale would meet demand for just two months, a supply measure low enough to indicate a seller’s market. The supply of homes for sale hit a low of 1.3 months in March.

Fox, the real estate broker, said homes currently on the market that are priced right and display well continue to get multiple offers, but that fewer buyers are willing to bite on houses that push for peak prices.  He worries that the rising prices are leaving behind would-be first-time buyers and homeowners who want to move up to a larger or nicer home.

But today’s buyers now have confidence about moving into home ownership and the interest rate bump shouldn’t be a deterrent, he said.

“The uncertainty from the 2008 crash is long gone,” he said.  “Everybody is understanding that real estate is a good long-term investment.”

-William Gilliland


Posted on November 30, 2016 at 10:11 pm
William Gilliland | Posted in Uncategorized |

Home prices keep increasing, even as real estate market cools down

Regional Multiple Listing Service reports documents shortage of homes for sale, even though the rainy season traditionally means fewer buyers are looking

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Portland area homes sales slowed in October, which is when the housing market traditionally cools down going into the rainy season.

Median sales prices continued increasing, however, reflecting the ongoing shortage of homes for sale, according to the most recent monthly report by the Regional Multiple Listing Service.

The new RMLS Market Action report says the median home price on the Portland area was $345,000 last month, an 11.5 percent increase from October 2015, when it was $305,000.

Much of the increase is because of the shortage of homes for sale. According to the report, there were 2,929 new listings last month, a 20.3 percent decline from September 2016 and a 4.4 percent fewer than a year ago.

“When you compare the numbers with last year at this time the surge-hot market definitely continues on a seasonality basis,” says says Lennox Scott, chairman and CEO of John L. Scott Real Estate. “Buyers are still out there, and with the lack of new inventory coming on the market we will likely see a repeat of last winter when too many buyers were competing for too few listings.”

The report also says average market time increased six days to 41 days by the end of October, although both lower priced homes and new homes are selling quicker, according to area realtors.

“The lower price ranges are still experiencing multiple offers as buyers compete for new listings as they become available,” says Jimi Couture, managing broker at John L. Scott Lake Oswego.

“New construction listings are moving fast,” says Brigitte Pascutoi, branch manager of John L. Scott Portland Sunset Corridor.

Although home prices are increasing they still vary throughout the Portland area, according to the RMLS report.

The highest median sales price in October was $525,000 in the Lake Oswego/West Linn area, followed by $486,600 in the North Washington County/Sauvie Island area, and $483,000 in West Portland.

The lowest median sales price in October was $229,000 in Central Vancouver, followed by $242,500 in Columbia County and $255,500 in the 5 Corners/Orchards area of Washington.

As always, if you have any questions, I’m simply an email or phone call away.

-William


Posted on November 19, 2016 at 10:35 pm
William Gilliland | Posted in Uncategorized |

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