FinancePortland May 24, 2016

Portland Real Estate: Why It’s Not A Bubble

KGW recently reported that Portland has the fastest-rising home prices in the United States. Check out this graph representing Multnomah County. The line at the top is the average sold-price-to-asking-price percentage, and the bars represent days on the market. 


It's incredible! Days on the market — from listing to closing! — is averaging less than a month. And the average sale price — AVERAGE — is above the asking price. Houses in Portland are selling immediately, and they're selling above list price in nearly every case. It's hard not to wonder when this bubble will burst and the market will crash again. This momentum can't last forever, can it?

Well, the pace of growth probably will slow down eventually, but I'm confident this is NOT a bubble, and we're not headed for a crash anytime soon. Here's why:

  • Buyers are paying cash. Approximately one-quarter of all Portland home sales in 2015 were all-cash offers. When a buyer pays cash, there's no mortgage on which they risk defaulting. The house is paid for and the money is accounted for.
  • Mortgages are stronger and more secure than they were before the last crash. The last crash in the late 2000's was largely due to irresponsible lending and borrowing. Whether the banks paid fairly for their part in the crisis is up for debate, but they absolutely learned a lesson about making flimsy loans. And just in case they didn't, the government put new restrictions in place to ensure that future mortgages meet higher standards. The result is that it is more difficult to get a mortgage, but those who do qualify are sound borrowers — much less likely to default. 
  • Portland is the greatest city in the world, so of course it's growing. Okay, this last point is just my opinion rather than a strict fact, but it is an opinion shared by many! This is a great city, and even though prices are rising fast, the cost of living remains much lower than in many other big cities. 

As prices continue to rise, the growth momentum will probably slow somewhat, but this is not a market that's headed for a nosedive. We can expect it to level off at some point — no one can predict when, but based on current trends, that still seems a long time from now. But unlike the wild real estate market of 2005, 2006, the money is there to back up the purchases this time around. We're not going to see a big wave of foreclosures and short sales. At worst, there may be a plateau coming, where prices don't rise and the homes for sale stay on the market a little longer. 

If you're waiting to buy because you're expecting prices to drop, you'll likely be waiting a long time. This is no bubble.


Uncategorized October 20, 2014

The Importance of Pre-Approval

I would love to take you shopping for your next home — I can't wait, in fact, and I bet you're excited, too. But before you even start browsing the listings, you need to get pre-approved for your home loan. You've probably heard this from a thousand different sources, and it may seem like I'm beating a dead horse, but I cannot stress this enough — shopping for a home before you get your mortgage approved is a fast path to heartbreak. I know from experience. 

When I was shopping for my home two years ago, before I was a Realtor, I heard the same advice: GET PRE-APPROVED! But I ignored it like a chump, because I'd already bought homes before. My credit was established and I knew what I could afford. Can we just look at houses, please? Turns out, the market is a lot different than it was the last time I got a mortgage. I thought I was any bank's dream borrower — the banks thought otherwise. In fact, they wouldn't even consider me. Since the financial crisis, the banks have adopted some very tight requirements for loans — and I didn't meet them. I learned this only after I'd made an offer on a home to which I'd become quite attached. The seller had other offers and wasn't interested in waiting for me to come up with the money some other way. I didn't get the house. This is a truly heartbreaking experience, and I want to protect my clients from it. 

Even if you think you know what you can afford, verify it with your lending institution. The rules have probably changed since the last time you did this. The market is competitive right now. If you are going up against other buyers, you need to prove to the seller that you are able to close the deal. 

Call or email me if you have questions about getting pre-approved. I can refer you to a mortgage broker who will help you get all your ducks in a row before you start shopping. Then when you find the home you want, we can write an offer and move forward swiftly.