What’s up with the Real Estate Market – FACT or FUD?

March 20, 2008

In the 20+ years I’ve been in the real estate industry, I’ve seen and experienced firsthand the various peaks and valleys of the real estate market. One of my biggest frustrations right now is the amount of FUD (Fear, Uncertainty and Doubt) being generated by the media about the state of the current real estate market and the local economy. In my opinion, there is a lot of misinformation and a failure to acknowledge the positives about our local real estate market. Our economy is in fact doing quite well and our real estate market is solid. Only the “perception” of the market is bad. Our local market is not going to be as affected by the sub-prime market as the rest of the country because the Northwest’s allocation of those bad loans is about half of the national average. I’d like to share some interesting facts and FUD that I’ve come across recently:

FUD: The media is telling us that foreclosures are at an all time high.

FACT: Oregon is ranked 36 out of 50 states for foreclosures as of December. Further, Oregon’s foreclosure rate is down by over 10% from November.

FUD: We hear that the financial markets have tightened and it is now harder than ever to obtain a loan.

FACT: Over 97% of all mortgages are current and being paid on time. Yes, the markets have tightened and have eliminated loans to individuals, but those are the folks that never should have qualified for a loan in the first place.

FUD: We hear that the market is falling and prices are unstable and only those with excellent credit can get a loan.

FACT: Most people with a current job and an average credit score can still get a loan just as they could in the past.

FUD: We hear how real estate sales and priced are down.

FACT: Portland is one of a few cities in the nation that has realized appreciation year over year. Property values were up 6% last year. New homes sales in Oregon were up 5.4% in ’07 over ’06. While an increase of 5.4% is not at the rate of past years, it is still an increase. The reality is that 18 – 24 months ago we were in a ridiculously hot market and now we are in a more normalized market. This contrast is being perceived as a collapse.

FACT: June of ’05 had the lowest home mortgage rates we had seen in over 30 years. So current rates that are be mentioned at a 3 year low are really a 33 year low. When rates were low in the past, home prices were increaseing. Now buyers are finding low interest rates and lower home prices at a time when builders, like me, have slashed margins to move homes. Low prices and low rates are seldom, if ever on the same axis! This is a great opportunity to purchase real estate at stable prices with low financing. I would encourage everyone to take advantage of the current market conditions.

OPPORTUNITY: If you are thinking about adding a rental property to your portfolio, now is the time. Rental rates are on the rise due to tighter lender requirements and now you need more than a pulse to qualify to buy a home. Rentals will cash flow sooner than they have in the past. Consider what I have done to fund my two boy’s college education. I have bought a home for each boy to help fund their higher education. You can do the same. With a 15 years mortgage, by the time they graduate from high school you have a free and clear asset that you can sell or refi to pay for college.

Historically, real estate has always been a long term investment. There have been and likely will be furture opportunities to buy and flip real estate. However, now is not one of them. When you invest for your family and/or financial security, you invest for the long term; not 6-12 months down the line but for years to come. At the end of the day, whether you buy a home from me or a competitor, I would encourage you to make the investment either to help a family member, as a rental, or for a change in lifestyle for yourself. We may never see this kind of opportunity again.

Tell me what you think. What has your experience been? Is the FUD getting to you?

2 Responses to “What’s up with the Real Estate Market – FACT or FUD?”

  1. Eric Hundin Says:

    I found your blog on MSN Search. Nice writing. I will check back to read more.

    Eric Hundin

  2. Allen Taylor Says:

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

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