Dubai Real Estate Market Has Global Effect

We've all seen the shows- the tallest building, fanciest bathroom, most man made islands and peninsulas- great examples of how crazy the real estate and hotel market are in Dubai. Now that major investors are asking for deferments on the $60 billion they owe, stock markets around the world have been shaky. A major investor in Portland doing something similar might affect local companies, and maybe one large Wall Street firm, but not have nearly the affect that companies in a tiny Middle East city/state have. With the commercial real estate crisis just starting to break, more international issues will have an effect on the stock market, as well as consumer confidence and banks ability to make residential mortgage loans.

Real Estate News Update

Here's a breakdown of the latest news on the real estate market, and my opinions of it.

• About 25% of homeowners are underwater in their homes, meaning the value of them has dropped below what they owe. This is a major issue if you have to sell, but if you don't, just wait out the market and the value will come back. The real value in a home is your life there, so if you don't have to move, stay put and be glad that you even have a house!
• Existing home sales rose 10.1% in October, a lot more than anyone expected. The media says that it is due to the first time homeowner tax credit, and low interest rates, which is true. They make that sound like a bad, thing, which its not.
• 13 people in Bend Or where just indicted for fraud based on activity during the real estate boom and bust. Tyler Fitzsimons, founder of Desert Sun Development, several of his employees, as well as employees of West Coast Bank and Umpqua Bank, are all allegedly involved in the collapse of a local real estate company.
• 22% of homes for sale in Portland are considered distressed.
• 32% of home for sale in Clark County are considered distressed.
  

Foreclosed Houses Can Be a Steal

CNNMoney.com wrote a good article on buying REO (real estate owned, a term that means the property has been foreclosed on and the bank owns it, don't ask me why!) properties and short sales. More and more of the market is turning into distressed properties like that, so it is important to know what you are getting into before you make an offer, or heaven forbid, fall in love with a house.

I don't agree with everything CNNMoney.com advised, see the original here.

1. Don't get caught up in a feeding frenzy- Banks put repossessed homes back on the market at cut-rate prices because quick sales help avoid the expense of upkeep, such as property taxes, insurance, heat and electricity. Those lowball prices represent golden opportunities, but they also attract dozens of buyers who may bid until homes are no longer bargains. Don't get caught up in a bidding war. Instead, carefully calculate what you want to spend and do not exceed that price.

2. Have Your Realtor Contact lenders directly- Smart buyer's agents establish relations with asset managers at banks. This may reward them with inside information or first crack at new foreclosures hitting the market. In the case of a short sale, for example, it can give the inside edge. If a buyer is pursuing a short sale -- buying a home for less than what the current owner owes on the mortgage -- she should talk directly to the property's asset manager. That way, if the short sale falls through and the bank repossesses the house, the asset manager knows she is still interested. It could lead to a quick sale without other bidders.

3. Get pre-approved from the lender you want to buy from- If you're trying to buy a property from, say Bank of America, it can help to get a pre-approved mortgage from Bank of America. Doing so may cause lenders to look more favorably on your bid if it's similar to others. Plus, you're not locked in if other lenders offer you better terms. You can always change your mind and get your mortgage from another source.

4. Be Prepared for Fixers- Most REOs are sold as is. That can be problematic today because so many foreclosed homes are in less-than-mint conditions. Often, the former owners were struggling to pay their bills and may have neglected routine maintenance. Or, they may have trashed the properties before leavingIn 25% of cases, homebuyers persuade lenders to fix some of the problems before the sale closes. Most of the time, banks would rather sell the house to the next available bidder -- one who doesn't ask the bank to pay for repairs. So be willing to consider a home that needs some work -- but budget accordingly.

5. Hire a real estate attorney- Once banks agree to sales, they often want to move fast and load contracts up with legal mumbo jumbo. As a result, buyers often do not have the time or expertise to figure all the angles. The solution is to hire a real estate attorney -- even in states where home sales are usually completed without one. Considering you're making a six-figure investment, the legal fees are cheap insurance against the risks.

6. Wait to make an offer- Homebuyers may be well served to wait before making an offer. Let the house sit on the market for a few days, giving others a chance to set the bidding tone. Then jump in. Have your Realtor call or email the listing agent to see if they can find out what other offers are, and what that specific bank is looking for. Maybe they won't consider FHA financing, or they are already planning on budgeting for some work.

7. Get as Many Inspections as You Can- With so many REOs in seriously deficient shape, it's essential to go over every inch with someone who can spot problems and tell you how much it will cost to remedy them. A foundation crack can be a minor problem or a deal breaker, and most ordinary homebuyers have no way of telling the difference. Like an attorney, an inspector can be very worthwhile insurance.

Not Married and Buying?

More and more people are buying condos and houses together before they marry, whether or not they even plan on it. This can be a great way to cement a relationship, but puts people into a whole new category that most don't even think about before deciding to buy. So how do you protect yourself and the relationship as homeowners and partners? TALK ABOUT IT! And make sure to do the following:
1. Put your intentions in writing- what will you do if you break up, loose a job, or someone passes away. In a break up it might be best to sell and divide the profits/loses equally.
2. Make a budget- who will pay for what? A 50/50 split would be nice, but rarely happens. Discuss what you want to purchase and save for in advance.
3. Make a house savings account- 6-12 months worth of expenses, including mortgage payments, utilities, etc, and large improvements you plan on in the future. If the worst does happen then you will have time to react and not loose the property.
4. Research the law- check with your Realtor and real estate attorney to find out what you can do to protect your assets and your relationships.

Monthly RMLS Report

Here we go again... The monthly numbers for the Portland real estate market from the RMLS are out. My favorite section is always the map with the median house prices by general area.

North Portland: $237,000
NE Portland: $262,000
SE Portland: $206,500
West Portland: $333,700
Milwaukie/Gladstone/Boring/Clackamas/Estacada: $253,800
Lake Oswego/West Linn: $381,500

HouseLogic.com

The National Association of Realtors has launched a beta(test) version of a new website- HouseLogic. There is a ton of great info on home repair, maintenance, and value. My favorite section is on the Tax Credits and Incentives. It breaks down what you can get credits for, such as tankless hot water heaters, how much you get, and even how big of a project it is to do the upgrade. It's a great resource if you are looking for projects to do on your current home, or want to research what you will be able to do when you buy a house.

South Waterfront Condo Auction a Success

Remember the big to-do over the auction of units at Atwater Place at the end of September? Well, the unofficial results are in, and 30 of the 40 units that had winning bids have sold. That's good news for the neighborhood, even though prices have dropped from the original values. Even with lower values, it's better to have a condo full than empty, and the success of the sale has spurred interest in other units.

Read more here.

Mortgages Staying Above Water

Zillow, the real estate website, released a report that stated that a smaller percentage of homeowners are underwater on their mortgages. This is good news! Even if Zillow isn't always correct in their values for homes, the fact that less people have homes that are worth less than the money owed on them is a good sign. Another good sign in the report was that home values didn't drop between the second and third quarter. While not rebounding, the market may at least be stabilizing over all.

Read an article about the report here.

Basics of the Extended Tax Credit

The National Association of Realtors put out a "cheat sheet" for the new tax credit for first time and move up buyers. Nothing changes for the first time buyers, it's still an $8000 federal tax credit, or $4000 each if married and filing separately. The date range is great! Instead of just saying when a contract has to close (such as November 30th) there is now a deadline for having a deal going (April 30th 2010) and then to get it closed (July 1st 2010). This will clarify most of the questions about the tax credit, I'm still getting asked if people can get the one expiring at the end of the month.

The big addition is the move up buyer credit of $6500. If you have owned your home and lived in it for 5 consecutive years out of the last 8, then you get that credit! It's great news for the market because the move up homes, usually valued over $250,000, have not been moving nearly as fast as the lower end. To make the market really buzz we need people to buy a home, have those sellers buy a more expensive property, and then repeat about 4 times!

Read the Full Cheat Sheet Here.

Blogging One Year Now!

I've been blogging regularly, usually, for a full year now. The best part has been that is has encouraged me to go out and search for more information about real estate, and process it well enough to be able to pass it on. I haven't let my personality out as much as I will in the future!

Well, enough about me, onto the really interesting stuff: The extension of the tax credit! Realtors have been hoping that the $8000 tax credit for first time buyers would be extended past November 30th, and it has. There is also a new tax credit for homeowners who are moving into a different house. A $6500 tax credit if they have lived in their current home for 5 years, which isn't as good as the first time buyers credit, but it is something.

Both credits expire at the end of April 2010, and assuming they get signed by President Obama, they hopefully will lessen the winter slump that the industry regularly sees.

Portland Builders Have New Plans

The big company builders in Portland have names that are synonymous with the real estate boom and bust: Buena Vista, Renaissance, Legend. All built McMansions during the hay day of large homes with several bedrooms, grand entrances, great rooms, and luxurious master suites. The new plan for all of them is to build smaller homes, for less money, and for less profit. This is going to be great for Portland, a city of young urbanites that stay single for longer, have roommates, and want to own their own home. The prices will stay around or under $3000, with square footage under 3000 as well. There may not be a boom for builders for many years, but they all hope to stay in business by getting back to basics.
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