Or anyone who has not owned a home in the last three years.  If you are considering buying a home this year, take advantage of the Federal Housing Tax Credit.  The Federal Tax credit is available to you for a purchase of your new home.  The sooner you talk with a tax professional the sooner you can determine how much of the allowable $7500 is available to you.  The great news is that there are possible revisions to the original Housing Stimulus measure of last year.  On Tuesday the House of Representatives passed H.R. 1 that removes the repayment requirement of the housing tax credit which currently has to be paid back within 15 years.  Also, on Tuesday the Senate Finance committee passed their version which eliminated the repayment requirement of the credit, but additionally extended the dead line from June 30th, 2009 to September 1st, 2009.  These changes are exciting and hopefully soon we will see what the final outcome is.  Regardless of what form this Housing credit takes, the current form or modified with these new changes, it is a great incentive to assist you in the purchase of your next home. 


For more details and frequently asked questions about the Federal Tax Credit go to the following website: http://www.federalhousingtaxcredit.com


To put this in perspective, our town homes here at Volare in Happy Valley, start at $229,950.  On a purchase, utilizing a FHA loan, the $7500 Tax Credit almost covers the $8048 necessary for the down payment.  This would be almost like 100% financing except the $7500 is interest free, if the requirement to repay doesn’t get removed with new legislation.


So, if you are considering buying a home, look into this as soon as possible.  If you can purchase a home before you file your 2008 return you can claim this credit on your 2008 return.  Just one of the many opportunities that exist in this housing market.


For additional information on the current Stimulus package and other tax changes go to the link below:



More great news out last week, “Mortgage rates fell below 5% for the first time ever!”.  In fact, borrowers are being locked into rates even below 4.75.  As I write this, rates have inched up a little, but these rates are still available under the right conditions.  This is what bank CD’s and Money Market accounts were paying.


See completed story: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b781E33BA-96DE-40EB-86A4-A48DBE686DA1%7d&siteid=nbih


To add to this, I was recently comparing recent sales of our town homes in our current new neighborhood in Happy Valley; Volare.  Our current sales are of similar prices to what attached homes were selling for here in 2004!  After reading this article from MarketWatch, I started looking at what the average 30 year mortgage rate was in 2004.  It was 5.96.


On a loan of $250,000 at today’s 4.75 that is a Principal and interest payment of $1,304.12.  If this were in 2004, with a property of the same value and loan amount at 5.96 the Principal and Interest payment would be $1,492.45.  To have the same monthly payment today as in 2004, a home buyer could afford a loan amount of about $285,000. This means that a home buyer can buy over 12% more home today than they could have bought in 2004.


As the article says, “Mortgage rates could remain low at least until the summer”.  We all know that these rates cannot stay this low for very long due to the concerns over inflation.  This just illustrates another great opportunity to buy into this market.  As was illustrated last February in the Time Magazine article, “Ignore the Headlines” that I discussed in August, with a 5% increase in rates a 10% drop in price is washed away.  All rates have to do is jump back over 5%, which they will, and what little drop in value we realize this year will be negated by the increase cost of money.

There will never be an opportunity to buy into real estate like we are seeing right now.  Like Warren Buffet says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”  This is a great time to be a consumer right now.  A consumer that is willing to buck the advice from the naysayers and the headlines.


Those that seize these opportunities will be all the wiser in the years to come. 

More great Real Estate news!

December 27, 2008

Interest rates are at the lowest level since Freddie Mac began it’s mortgage rate survey in 1971!  The rate average fell to 5.14% last week.  With 30 years mortgages being locked as low as 4.75%!  In fact, as one point last week rates were available as low as 4.50%.  This is basically free money.  These are rates that are usually offered for short term CD’s and money market accounts.


To put this in terms of how it affects the monthly affordability of a home purchase, on a $300,000 home this has lowered the monthly payment over $400 from what rates peaked at this year.  With home prices softened and the availability of inventory to select from, this just creates more of a reason to buy real estate now!


See full story at: http://www.marketwatch.com/news/story/benchmark-30-year-mortgage-rate-lowest/story.aspx?guid=%7BFBF44C67%2D5FB8%2D431A%2D9B58%2DF311B3CA8075%7D&siteid=bnbh

Rouse or Reality

October 10, 2008

I want to start this entry disclaiming the fact that I know I am not an expert about the current market situation.  However, as most of us are, I am very frustrated with our government officials and how they are handling things.  Having said that, with some of the many crazy things that are happening in Washington each day I begin to wonder, do I really know that much less than those who are leading us?


We have been told by our leaders that we needed to get the “Bailout” plan adopted immediately to insure stability in our financial markets and the economy.  That they needed to get this money infused into the system to buy up these underperforming loans and it would fix it.  However, for some reason last Monday the 29th of September after a day of turmoil wondering if the plan would fail or pass, the plan failed.  The market closed down almost 800 points.  The next day it rebounded about 500 points.  If this was such a bad situation for Wall Street and the economy, why did the market rebound the next day after the plan failed?  We then proceed through the next couple of days with the politicians pointing fingers at each other over whose fault it is that it failed.  I especially liked Barney Frank stating that it was the Republican’s fault that it didn’t pass.  I guess he doesn’t realize that the Republicans are in the minority still.  So, it finally passes on Friday the 3rd of October and the market still closes down 157 points.  Now as I write this the market closed today the 9th of October at 8579.  The lowest level since April of 2003.  If this was the end all, the silver bullet, what the hell happened!  If this doesn’t show the incompetence of our leaders, I don’t know what does. They still think that merely throwing money at problems will fix them.  How many more times will they make these attempts only to fail before it resonates to them that more thought is necessary?  The reality is, the more the government meddles in the market system the more they will screw it up.  


Proof of this goes back to 1999.  The Clinton administration pressured Freddie Mac and Fannie Mae to lessen the lending requirements to start making loans to low and moderate income people. This was addressed in a September 30, 1999 story written by Stephen Holmes in the New York Times called, “Fannie Mae Eases Credit to Aid Mortgage Lending”.  The Mr. Holmes wrote, “Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.”

Once Pandora’s Box was opened the Mortgage industry had a hay day.   The story even stated that it was a concern even back then that this might happen.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”


To read this article in its entirety see this link:



I found another story that I think illustrates just how this mess got started and where the blame lies.  In a great story written by Charles Calomiris and Peter Wallison in the WSJ, “Blame Fannie Mae and Congress for the Credit Mess”.  Their story stated that, “The poor choices of these two government-sponsored enterprises (GSE’s) – and their sponsors in Washington – are largely to blame for our current mess.”


They go on to say, “Freddie Mac and Fannie Mae committed to increase financing of “affordable housing”.  They became the largest buyers of Subprime and Alt-A loans mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion.  In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.”  Again, I think the intentions were good, but the competence was not.  It should really scare you that the same people involved in creating this are the same people holding the purse strings on an attempt to clean it up.  I’m sorry, but that is just messed up.


To see the complete story go to: http://online.wsj.com/article/SB122212948811465427.html


The long and short of this is that nothing that we are hearing from our government leaders we can count on.  We need to just stay the course the best we know and not panic.

I am hearing stories of people taking there money out of Banks.  Some even thinking that this is of “Great Depression” proportions. It is not and it won’t be if we keep our heads. At the end of the day we need to take care of ourselves. Continue through our days keeping a positive attitude.  We can’t worry about what is out of our control.  We are in control of our own lives and our families lives, which is what we need to stay focused on.  We are resilient people and so is our US Economy.  It will rebound to be the strongest economy in the world and so will our own personal finances to the comfort that we once had. 

The Oregonian published and article by Dave Hogan a couple of weeks ago that stated what many of us have been thinking.  Mr. Hogan wrote, “The downturn in Oregon’s economy is not expected to grow worse but will continue into 2009, then begin a slow recovery in the second half of next year, state economists said Thursday.”  This statement says a couple of things that are important.  First, you will continue to hear from the naysayers that we are still free falling and there is no end in site so, it is still better to rent.  The State Economists are stating that it is not expected to get worse.  As the story I wrote about last month referenced, our local market is only down 1.1% year to date.  So, if we are only down 1.1% as of August continuing to rent will be one of the biggest investment mistakes of your life.  What little our market may slide, if any, will be eclipsed by a rise in interest rates after the first of the year as the market tightens up.  The next 6 months will be the best time to buy a home that we will probably see in the next 10 years.  Second, the end is believed to be in site.  With every report that shows that building starts are down, as mentioned in this story, it should be acknowledged as good news.  This means that due to the fact the building permits have been down since last November, if they remain down until next spring, we will be able to reduce the current inventories in time for Spring & Summer of ’09.


For a review of the completed story see this link: http://www.oregonlive.com/news/index.ssf/2008/08/economists_say_downturn_to_con.html


I feel that over the next few months we are going to be hearing more and more good news.  That is not to say that all will be good.   There will be plenty to satisfy the naysayers appetite, but there will be more and more signs of improvement and more importantly signs of opportunities that buyers should be seizing in real estate.  Remember, Real Estate has doubled about every 10 years locally and nationally.  I believe that this is the beginning of the next 10 years.  Will you sit this one out again or take advantage of it?

After reading some of the many negative articles that have been written since my last entry, it occurred to me that we quote from some of the same statistics.  However, the naysayers quote only what is negative, builders and home owners having a tough time and how the market compares to previous markets.  Yet, if any of us in the industry, and now more outside of the industry, spot light improvements and opportunities in the market we are labeled as propagandists.


This isn’t to say that we shouldn’t keep in perspective past markets, but to inform based only on how the current market compares to the past without including current performance is, I feel, disingenuous.


Would you even listen to the news if it only mentioned how the stories statistics related to the year before?  If the weather broadcast for the week only stated that the temperature would be 5 degrees warmer than last year, but didn’t tell you what the temperature would be for the week.  How about the news caster stating that “Crime is up 6% over last year”.  With no mention that actually all crime was down, except auto thefts.  Would this be acceptable as a complete story?  Would you even listen after awhile when you began to realize the missing information in the stories?  So, why listen to those who say that the Portland market is declining.  When in fact, out of the 12 regions of the Portland Metro area only 2 are showing signs of depreciation.  Compared to last year yes, the median sales price for May is down 3.2% however, it is up from April ’08 4.5%.


Acknowledgement of the opportunities within the market isn’t a denial of the current market slump.  Of course, the market is down from last year.  No one argues that.  Sales are off by over 30%.  It is also up month over month since December.  May’s sales in the Portland Metro area where up 17.8% over April.  I am criticized because this is a seasonal trend and so, this fact is irrelevant.  However, if you listen to those who are telling only the negative about the market.  How would you even know this is happening?  Seasonal or not?  With all this negative press, unless you are in the industry you would never realize this. The facts are that rates are at historic lows again and prices have corrected back to an affordable level.  To say that the market is good and it is a good time to buy again does not ignore what the current conditions are.  It clearly informs those in or considering getting in the market that conditions to buy are great.  You hear that it is difficult to get financing.  Yes, it is compared to the last couple of years, but recent improvements from Fannie Mae and FHA allow home buyers to still get 97% financing and there are even still products for 100% and stated income financing.  However, all you tend to hear is how difficult is to get financing.  How does that statement and the like inform or help anyone?  Builders are selling homes at or below cost to move them.  Isn’t that an opportunity that is worth looking into if a buyer is considering a home?


You decide who is churning out propaganda and who isn’t.  There will always be those who view the glass half empty and those who view it half full.  Obviously, I see it half full.  The reality is, we all have to adjust to this market and some of us are having a tough time.  No doubt, there will be more bad news which will be exploited by those that enjoy doing so.  However, to just resign to the fact that things are bad and ignore all that is positive, is foolish.  Moreover, to try and convince people that they shouldn’t invest without full disclosure of all the market offers is disingenuous to say the least.  I would rather inform people of the opportunities they can take advantage of than fear people into inaction and miss out on opportunities.   Really the only thing that people should fear now is that if the market continues to improve prices will strengthen and rates will go up. 


Those that do ignore the advice of the naysayers will reap the rewards of this market in the yeas to come.  I do feel that the market has made it’s correction and since real estate historically doubles about every 10 years, I feel this is the beginning of the next 10 years.

Another great article that vindicates a lot of what many of us have been saying was written recently.  The Wall Street Journal published an article written by Cyril Moulle-Berteaux on the 6th of May.  This article nails it!


It states that April will show that it was the bottom of the housing decline.  We feel that in our sales offices and what we hear amongst our peers.  Buyers are starting to feel a bit more confident and are starting to revisit the housing market.  More positive news like this Wall Street Journal article and our local new channel 6 had a great story about the Portland housing market last week all help rebuild the confidence that has been lacking in our market place.  We still hear plenty of negative press, but we will always hear that.  When the market turns around then it will be bad press about how unaffordable it is.  Most of the naysayers won’t find anything positive no matter what direction the market goes.  However, for the rest of us it is improving.  Ever it be so slowly, it is improving.


One theory that I have heard before and was addressed very well in this article is the belief that prices must drop another 30% before we get back with where they’ve been historically.  However, the article reads; 


“This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.


“Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.”


The national trends that are mentioned in this article are being realized here in Portland as well. The article addresses the fact that home inventories have been falling over the past months.  Here in Portland, RMLS reported that we had 12.8 months of unsold inventory in January.  By March we were down to 9.1.  We have seen an increase back to 10.1 in April however; an increase in inventories is historically in line with this time of year.  We have seen a 6.8% increase in pending sales from March to April.  Of course, all that will be referenced by the naysayers in their blogs and stories is that sales are down from last year with no mention of the increase in sales month to month since December of last year.


The National Association of Realtors has also just reported that, “buying a house in the Portland metro area is once again affordable for a family earning the median income.”  All the more reason to get into this market now and stop listening to those who continue to say the sky is falling in spite of the facts that things are improving.



A link to the entire WSJ article is provided below:


Real Estate values have traditionally doubled every 10 years or so.  This has been the case for many decades.  But with every change in the market, there are those who say the end is near. As I often tell people, get your eyes off your feet and look ahead down the road. Real Estate has and always will be a long-term investment.  If you were looking to buy and sell in 6 months, I would advise you to stay put.  However, that is not why you buy. Whatever happens in the next few months should not dictate a person’s decision regarding their next home. 


Three weeks ago The National Association of Realtors stated that they expect the national market will decline by an estimated 1.2% in 2008.  1.2%!  If this is not defining the bottom of the market or the near bottom I don’t what is.  Bear in mind, this is averaging the top metro areas like Charlotte, North Carolina and Portland, Oregon with the likes of Miami, Florida, Las Vegas, Nevada and Detroit, Michigan.   So, if the worst they are predicting is 1.2% percent, I think that’s a pretty good indicator of how these top markets are going to perform this year.


On a $300,000 sales price today, 1.2% is only a “possible” decline in value of $3600!  Is it really worth missing out on the buying opportunities today over $3600?  Not to mention that the interest rates have increased 1 full percent since the 3rd week of January, this year, to about 6.25%.  That alone should be getting the attention of prospective buyers.  That same house with a 90% LTV (Loan To Value) mortgage at today’s 6.25% interest rate would have a Principal & Interest (PI) payment of $1662.  If it were purchased back in January at 5.25% with the same purchase price and loan amount, the PI payment would be about $1491.  So, not buying that home over just the last 10 weeks would have cost you $171 a month or $2,052 a year.  I don’t need to do the exercise of what the same house would cost with a 1.2% drop in value and another .05% increase in rate.  I think you get the picture. The point is that if you wait to feel out this market, home prices could steady and sellers might become less willing to negotiate. 


Portland Monthly Magazine just published a great story about the local real estate market that vindicated a lot of what I’ve been saying.  They stated that, “Portland hasn’t seen a decline in real estate values since the mid-80’s and our average annual increase is typically under 10 percent.  As a result, even if our market does stumble, we won’t have nearly as far to fall as a place like California, where double-digit annual price increases have been replaced by similar decreases.”


Suffice it to say, our local market is fairly steady and any dips are far below those of the national average. Not to mention, it’s become a buyer’s market once again, which, if you looked at a graph, would be right in line with how the market works. If you’re looking at real estate as a long-term investment, don’t delay. There are excellent opportunities out there right now.

How refreshing to finally read a feature article that accurately portrays Portland’s position in the current housing market. Portland Monthly Magazine’s April issue (on newsstands now) backs up my position that Portland is suffering far less than the rest of the nation and is still a great place to invest in real estate.

In the article, Oregon economist Tom Potiowsky says, “We’ll likely be spared the deep shocks affecting the rest of the nation, in part because of our long history of slow, steady growth.”  He adds, “We’re not immune to what’s happening with the national economy but where others are going to require major surgery, we’re probably just going to need aspirin.”

The article also supports my position that Portland remains a great place to buy, “The bottom line for buyers in 2008: With interest rates relatively low and the number of homes on the market high, now is a good time to buy, if you can afford the market.”

In the past 20 years, house prices in Portland have continued to rise, leaving us in one of the strongest markets in the country today. If we were to examine a graph of Portland’s housing market and home values over the last 20 years, we would see a rise in the year-over-year growth in home prices and values in the Portland area.

Hopefully, one day soon, Oregonians will realize that the principals of our market are all in place and this is truly an unbelievable time to invest in real estate.  When they look back on this time a year or two from now and see the equity that they gained by not listening to the “Chicken Littles”, they won’t be needing aspirin – they will be treating themselves to champagne.

I wanted to respond to some skepticism about my last posting from some who have been frustrated by the financing process. If you have a job and a decent credit score but are still struggling to get financing, I would advise you to talk to more than one loan officer or lender. The Wells Fargo lender we use at Marnella Homes is still offering financing up to 100% and agrees with my assessment of the local market.I stand behind my previous comment when I said that the people who cannot get financing today are those who truly can’t afford to buy a home. The poor lending practices that gave these people loans in the past stretching them way beyond their means are the reason we’re hearing about the woes in the lending community today. Our homes are still selling and the only people that are not getting financing are those with bad credit, not enough income to afford the monthly payments or zero money for a down payment. However, those who can improve on anyone or a combination of these three issues can get financing through our programs.For those of you struggling to get the financing you need to buy a home, I encourage you to seek out several of the many competent loan officers out there that work for lenders who can help you. Best of luck and please let me know if we can help.