The Effect of the Economy on Real Estate One of the real concerns that many investors continue to have involves the direction of the economy in the United States. The Bureau of Labor Statistics reports that the highest unemployment rate our country has seen since the 1980’s occurred in 2009. The good news is that it has improved significantly since then. The bad news is we are not yet at full employment. In the western United States, we are seeing some good indicators that growth is occurring. The construction sector, among the hardest hit over the past five to six years, is showing new growth, up over 8.3% in the past 15 months. Much of the growth on the west coast is coming in computer-related and green energy technologies. Intel has their new $4 billion plan in Hillsboro under construction; Vestas (a wind energy company) is building a $66 million headquarters facility; Solorworld is adding 1,000 jobs; Daimler is adding 350 jobs; Computer Services is adding 250 jobs. This is great news not only for employment, but for real estate as well. All those workers need to be housed for their jobs (office and/or industrial spaces); those workers need places to live (housing); and they will have income to spend on food, basic necessities, and recreational spending. We need to keep a close eye on the unemployment rate, as it will give a very good indication of the future direction of all the related real estate growth – and how long it might continue in a positive vein.
Source: REIS Observer, Portland, 2013 This information is from sources deemed to be reliable, but must be verified with ones’ own legal, accounting and tax professionals. This e-note is provided as information only, and is not guaranteed.
Great news for homeowners with Debt Relief in 2013! Happy New Year Everyone!
The final act by the 112th Congress to avoid the fiscal cliff was a significant victory for homeowners. As a part of the legislation that cleared the U.S. House of Representatives late Monday night, Congress extended the cancellation of the mortgage debt relief provision for one year, through the end of 2013.
What does this mean?
If a lender forgives some portion of a homeowner’s mortgage in 2013, either as part of a short sale or foreclosure, or in a loan restructuring that reduces principal, the owner/seller will not be required to count that forgiven amount as income for tax purposes.
Why is this important?
Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received – and will never receive.
More than 20% of current homeowners with a mortgage are in a distressed financial situation and owe more on their homes than the current market value.
The housing market, while recovering, is still fragile enough that this tax relief is necessary to provide stability in the coming year.
Happy Monday Friends! I found this article from “Oregon Business.com” really interesting and pretty true to our sales and rental market. Great time to buy more investment properties!!!
Oregon arrived a little late to the housing crash and didn’t fall quite as hard as states like Florida and Arizona. But as real estate in some states begins to recover, prices here have continued to fall. Homes have lost about a quarter of their median value since their peak in 2007.
Meanwhile, household incomes are still reeling in the wake of the recession, pummeled by higher-than-average unemployment and wage stagnation. So even though home prices continue to fall, more Oregon homeowners and renters are spending in excess of one-third of their income on housing.
Housing costs that take more than 30% of a household’s income are considered unaffordable. The U.S. Department of Housing and Urban Development (HUD) uses 30% to figure low-income housing subsidies; lenders use it to determine mortgage qualification. Households paying more are deemed “burdened.”
In 2010 Census estimates indicate that 54.3% of Oregon renters were burdened, increasing 7% from 2006, while 42.8% of mortgage holders were burdened, a jump of 15% in five years.
One factor in expensive rentals is the state’s low inventory. The statewide rental vacancy rate in 2010 was 5.6%, the fourth tightest in the country.
Oregon’s homeownership is among the lowest in the nation and has fallen further since the recession. In addition, of all occupied homes in 2010, 37% were rented, the seventh-highest rate in the nation.
“There’s a lot of pressure on rental rates, and that’s probably because more people who had been in homeownership are now looking in the rental market,” says Margaret Van Vliet, director of Oregon Housing & Community Services, the statewide agency that administers federal money and tax credits for low-income housing. “There’s been hardly any construction of new multifamily [housing] for many years,” she adds. “The market is re-correcting but, in the meantime you’ve got folks who are really kind of stuck. So it’s a tough time across the whole spectrum of housing needs.”
According to a report from the National Low Income Housing Coalition, Out of Reach 2012, America’s Forgotten Housing Crisis, a full-time worker in Oregon needs a “housing wage” of $13.01 per hour in order to afford to rent a one-bedroom apartment at fair market rent (calculated by HUD at 40th percentile market rents). The average wage in Oregon of a full-time worker is $12.59 per hour. The biggest affordability gap in the state is in Columbia County where the average wage is $8.26 and the housing wage is $14.83. Portland has a small affordability gap because it has more multifamily housing and better-paying jobs; its housing wage also is $14.83 and its average wage is $14.33.
Van Vliet says persistent unemployment and underemployment have been most responsible for the inability of Oregonians to afford rents, as well as contributing to foreclosures. Hiring is slowly improving, though most of the new jobs are in the Portland metro area “so the recovery is going to be lopsided, and that’s going to put rural communities further behind,” she says. The five counties still suffering seasonally adjusted unemployment in excess of 12% in February were all rural: Crook, Grant, Harney, Jefferson and Lake. The statewide rate was 8.8%.
Within the state’s urban areas, Bend and Medford stand out as the least affordable housing markets, though both may be improving. In 2010, 48% of mortgage holders and more than 64% of renters in the two fast-growing metros were housing burdened. Since 2006 the burden hadn’t changed for homeowners, but renters’ burdens grew 22% in Bend and 12% in Medford. Meanwhile, the Federal Housing Finance Agency’s All-Transactions Home Price Index, an indicator of single-family home prices and refinance appraisals, dropped 40% for Bend and 30% for Medford.
Bend also witnessed the most dramatic surge of another indicator of unaffordable homes: foreclosures. In Deschutes County, notices of homeowner default shot up from 45 in 2007 to 314 in 2010. John Helmick, CEO of Eugene-based Gorilla Capital, which buys, remodels and resells foreclosed homes, says that after peaking in 2010, this indicator is finally brightening in 2011: “Throughout all the 20 Oregon counties in which we track the data, we saw an average of 25% decline in the number of new foreclosures being filed, and we see that same decline continuing in 2012.”
Jaynee Beck, a realtor with Duke Warner Realty in Bend and president of the Central Oregon Association of Realtors, also has reason for cautious optimism on the ability of new buyers to afford a home. “Our market has really done a big correction,” she says, “and it’s brought a lot of the buyers back to our market that were priced out of it in the boom.” That includes many locals who grew up and worked in Bend but had to commute 45 minutes away to find affordable housing when the minimum price in Bend was about $300,00.
“Now we actually have homes under $100,000,” says Beck, “so those people can come back to Bend.
Happy Wednesday Everyone! Found this article pretty interesting. My listings have definitely seen an increase in investor buyers and a lot of long time clients are starting to “get back in the game” with rates and prices so low. Call me if you have ANY real estate needs!
- Michelle and Kyle Hayes
The 2011 Colliers survey, compiled near the end of last year, has found that many investors are tired of waiting for opportunity, and they are beginning to look to smaller cities to obtain higher rates of return.
Though bargains can be found in some secondary and tertiary markets, today’s savvy investors aren’t just looking at price. They appear tired of waiting, and they want to find properties with good leases, strong tenants, and a good ROI.
Another comment being heard by investors is that they are concerned about inflation being just around the corner, and having assets is better than having cash. Interest rates are also hard to beat at the present time.
Aside from the promise of higher yields, what’s drawing investors to secondary and tertiary markets? The simple answer is jobs — and the prospect of more jobs. Cities with strong financial, energy, trade, or biotech sectors and population growth are generating the most interest,
Cities with their strong economies and universities continue to be favorites as well, particularly among office investors. Many purchases of existing buildings are coming in below replacement costs.
You may want to consider ways to share what is going on in your local markets with jobs and growth industries. This is a once-in-a-generation opportunity – with both pricing and interest rates at all time lows. Don’t miss the opportunity!
Source: Commercial Investment Real Estate, March 2012 issue.
Exciting news! I completed my Short Sale HAFA Specialist training last week and now have my HAFA certification!
A lot of people have not heard about this government program but its a sister program of HAMP- Home Affordable Modification Program. The media is starting to talk about this program more and more. I project more Realtors will be familiar with this program within the year.
Your tax dollars are paying into this program… so if you know of someone that has had a hardship and receiving a check for $3,000 at closing could help them, please have them contact me for eligibility requirements.
The Home Affordable Alternative Program (HAFA) was created as the next option for borrowers who did not qualify for a HAMP Modification or preferred to go directly to a foreclosure alternative such as a short sale or deeds-in-lieu of foreclosure.
Here’s the skinny on the program-
Unlike previously, you may NOT need to miss any mortgage payments
You WILL receive $3,000 at closing for relocation support
Debt forgiveness (no deficiency judgement)
You may be able to purchase another home immediately after closing
You will not have a foreclosure sale as long as the borrower performs in accordance with the terms of the HAFA agreement.
There is a percentage built in for outstanding liens on the property- this is HUGE if you have tax liens, divorce liens and so on. Most short sales do not allow proceeds for these to be paid.
Do you have a friend or family member this may be able to help? Have them contact me ASAP to see if they qualify. If anything, I can help them with a modification for free!!!
Great news for Portland! Have a great Tuesday! Kyle and Michelle Hayes
February 6, 2012 – The list of housing markets showing measurable improvement expanded by 29 metros in February to include a total of 98 entries on the National Association of Home Builders/First American Improving Markets Index (IMI), released today. Thirty-six states are now represented by at least one market on the list.
The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. The February index adds some metropolitan areas that have been particularly weak; this is due to the fact that the IMI measures improvement from a bottom, and some of the hardest hit markets are showing signs of coming off of extreme lows. Keeping this in mind, notable new entrants to list in February include Miami, Fla; Boston; Detroit; Kansas City, Mo.; Portland, Ore.; Memphis, Tenn.; and Salt Lake City.
“The number of improving housing markets has risen for six consecutive months, and 36 states now have at least one metropolitan area on the list,” noted NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “This indicates that despite the many challenges that continue to drag on a housing recovery – including the tight lending environment for builders and buyers – improving conditions are slowly but surely spreading from one housing market to the next.”
“While many of the markets on the February IMI are far from fully recovered, the index points out where employment, home prices and housing production are no longer retreating and have held above their lowest recession troughs for six months or more,” said NAHB Chief Economist David Crowe. “This is a sign that a large cross section of the country is starting to turn the corner as local economic conditions stabilize.”
“The fact that there are nearly 100 markets now on the improving list shows that the momentum is building for a housing recovery and that more buyers and sellers are starting to feel confident enough to return to the market,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three areas for at least six months following their respective troughs before being included on the improving markets list.
Seven markets dropped from the NAHB/First American Improving Markets Index in February as they experienced softening house prices. These metros include San Jose, Calif.; Washington, D.C.; Kankakee, Ill.; New Orleans; Worcester, Mass.; Jackson, Miss.; and Sherman, Texas.
A complete list of all 98 metropolitan areas currently on the IMI, and a separate breakout of metros newly added to the list in February, is available at: www.nahb.org/imi.
Editor’s Note: The NAHB/First American Improving Markets Index (IMI) is released on the fourth business day of each month at 10:00 a.m., ET, unless that day falls on a Friday – in which case, the index will be released on the following Monday. A full calendar of release dates can be found at www.nahb.org/imi.
The index started in September with 12 metro areas and has expanded steadily. February marks the first time Portland made an appearance. In all, 29 new cities were added to the list this month.
“This is a sign that a large cross section of the country is starting to turn the corner as local economic conditions stabilize,” said David Crowe, the group’s chief economist.
But seven markets were knocked from the list in February after posting weaker home prices.
The group uses employment data from the U.S. Bureau of Labor and Statistics, permit data from the U.S. Census Bureau and a home price index published by Freddie Mac. That pricing index is reported on a quarterly delay, so the most recent pricing information is from September.
Interesting article I wanted to share. The numbers seem to be right on from what I’ve been experiencing although I thought the amount of homes that sold as short sales would be higher. But it makes sense if a home doesn’t sell as a short sale it will eventually be bank owned and sold. Enjoy ~
More homes in the Portland area sold last year than in 2010, but that didn’t stop prices from losing ground.
Falling values have dogged the housing market, keeping buyers and sellers on the sidelines. Foreclosures and short sales have weighed on market values, and observers are still watching for Portland-area prices to hit bottom.
The 19,682 Portland-area homes sold in 2011 represent a 4 percent increase compared with 2010, according to the Regional Multiple Listing Service. But the median price for the year fell 7.9 percent, to $221,000.
The increase in transactions couldn’t outpace the price declines. RMLS reported $5.2 billion in Portland-area home sales in 2011, an 11-year low.
Distressed properties continue to weigh on prices. Of the homes sold in 2011, 22 percent were bank-owned. Those had an average sale price of $170,000, a 36 percent less compared with market-rate properties. Another 11 percent sold as short sales at a 17 percent discount.
On the upside, year-over-year declines got smaller in 2011, which is generally a sign of pricing stabilization. Some analysts have said prices could reverse their trend this year after 4 years of slipping and sliding lower. Clear Capital, a real estate research firm, said it expects Portland-area prices to increase by 1.9 percent in 2012.
“You’ve got to get confidence, income, jobs,” said economist John Mitchell of M & H Economic Consultants. “That’ll keep this real estate thing going. When you see prices start to stabilize with continuing low interest rates, consumer confidence, rising rents, I think you’ll see activity up more.”
Many would-be sellers sat on the sidelines in 2011. The number of homes listed for sale during the year dropped by 25 percent, to 34,000.
That’s led to a sustained decline in the overall inventory of homes. At December’s sales rate, it would take only 5.3 months to sell every home on the market, the lowest point in at least three years.
“People realize that if they bought a house in 2005, 2006, they’re not going to make any money putting their home on the market,” said Tim Duy, a University of Oregon economist. “Consequently, they’re just holding. There’s really not any faith in these individuals to put their house on the market.”
Some buyers who might buy a home in other market conditions are reassessing the value of buying a home as an investment, Duy said.