Category: Buying Advice

What to do when buying real estate in Lake Oswego, Oregon

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Basements

Photo courtesy of Google Images
One of the most frequently asked question I hear when I am working with buyers who are relocating to Oregon from other states is why don’t our newer homes have basements? It’s simple really. It’s because we have such a mild climate that our frost line is not very deep below the surface. House foundations need to be footed below the frost line to prevent the building from shifting during the freeze-thaw cycle. In really cold climates such as you find in the mid-West or back East, the frost line is quite deep. Because the builder has to take the foundation down so far into the earth, it makes economic good sense to utilize the space created by also putting in a basement.

In the earlier days of housing in Oregon, pretty much prior to about 1940, the people building homes often had come West and were building what they were familiar with. So in the Portland area, and even here in Lake Oswego, the houses built prior to 1940 usually do have a basement. But homes built later than 1940 rarely do.

Basement of Chillon Castle Photo courtesy of Wikipedia
The exception is a house built on a lot that slopes down from the street. Even in today’s new homes this sort of a lot is usually taken full advantage of by building a “daylight” basement. A daylight basement is different from a traditional basement in that it has at least one side that is fully above the ground. So you can have full size doors to the outside as well as full size windows.

Finished vs Unfinished
In many parts of the country basement square footage is not included in the total square footage of the house unless it is finished as living area. In Portland I think this was the case about 20 years ago. Gradually, as Realtors and sellers included unfinished basement square footage in the total square footage of the house, this became acceptable. So if you are looking at a house with a basement, you’ll want to figure out if the basement is finished or not.

Unfinished basements do have value. They are great areas for storage and utilities. But they are also great as a space that can be used roughly: for exercise, play area, and hobbies. Do they have the same value as living area that is above the ground? No. I put the question directly to an appraiser early in my career. He told me he felt an unfinished basement had about half the value per square foot as finished living area above ground. A finished basement can equal the value of the living area above ground if it is done with quality and if it has ceiling height, plenty of light, and windows that are large enough and close enough to the floor for safe exit in a fire.

Keep It Dry
The biggest issue with a basement is that it can be prone to water intrusion. Is there such a thing as a basement that will never leak? Perhaps today with codes that are better and if the proper measures are taken to ensure dryness. Probably the single most important thing to keep a basement dry is to keep gutters on the roof clean and working properly. This will take water away from the house and keep it from saturating the ground next to the foundation. The next consideration to a dry basement are drainage systems around the foundation and perhaps even the installation of a sump-pump to take water away from the house. Leaky basements can be fixed.

I really love basements. My own home has a finished basement that has been a great rec room over the years for everyone in the family. It stays cool in the summer and warm in the winter. And when my kids were teenagers, it was the neighborhood hangout. I was one of the Moms who liked having all of the kids over because I had a place they could hang out.

Let me know if you have any questions.
Dianne

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Price Per Square Foot

Price per square foot is a handy tool when trying to calculate value for a house. It is commonly used by Realtors, home buyers and sellers, and Appraisers. It can also be a bit misleading. So I thought it was time to take a good hard look at it.

Two weeks ago I got an e-mail from a reader wanting to know if Lake Oswego had an average price per square foot that houses were selling for. Trying to be helpful, I went back into the previous week’s sold properties (3/7-3/13) and found that they had sold for an average of $133 per square foot. However, this lumped all of the solds together (condos and detached houses), and was only a 1 week snap shot. Wanting to delve deeper, I re-did this exercise and broke it up into condos, detached houses, and waterfront. Again, these are averages.

This snap shot reflects sales in the last 30 days:
Condos
18 condos have sold in the last 30 days. The least expensive per square foot was $68. The most expensive was $389. The average sold price per square foot was $158.

Single Family Homes
33 single family homes have sold in the last 30 days. The least expensive per square foot was $92. The most expensive was $279. The average was $174 per square foot.

The average/average (in other words both condos and detached houses) was $167 per square foot.

Now, some clarification. These are some widely swinging values. What separates the low values from the high values are variables such as age, condition, and location. A house that is brand new is generally worth more than a house that is 50 years old. A house in a high-demand location like First Addition is going to be worth more than a house on a busy street in Lake Grove. These averages do not take into consideration these variables.

When you value a house using price per square foot, you really need to be comparing that property to others that are as similar to it as possible. But averages are interesting. It kind of creates a lens through which to look. If the average for houses in LO is $174 per square foot, and you are looking at a house that is priced either greater or less, why is there the difference? Is it worth more because it’s a fantastic house? Are you getting a chance to get a screaming great deal?

Waterfront
I purposely left out waterfront properties from these averages because I think that they have their own unique valuation. We happen to have both a lake and a river in Lake Oswego, so waterfront is an important part of our market. To look at waterfront averages, I went back 6 months in order to have enough properties in the study to make it useful. I found a low per square foot of $73 (OK, that is just amazing!) and a high of $571. The average sold price per square foot was $287.

Then there is the issue of measuring
With all of this emphasis on value per square foot, one of the realities is that measuring a house is not an exact science. Two highly qualified professionals can measure the same house and arrive at different numbers. Do you count a staircase twice? After all it exists on more than one level. Yet, it really is only floor space that is used as a single level. Then there are tricky floorplans with cut outs and overhangs that can not be measured from the ground. To measure, you end up doing estimates based upon other measurements of either the interior or surrounding walls that can be measured. I am currently involved in a sale that is new construction. The builder, based upon architectural plans, has a measurement of 3650 square feet. The appraiser who was at the house last week found a measurement of 3823 square feet. Just using the average in LO as I calculated above, that’s an additional value of $30,000.

Ultimately my perspective is that looking at price per square foot can be helpful, but it needs to be taken with some understanding that it is not an exact science. As a buyer or a seller, you also need to factor in the obvious things like age, condition, and location, but also how much do you love the house. Is it worth to you what is being offered? Because ultimately a house is worth what a seller is willing to sell it for and what a buyer is willing to pay for it. These are human decisions and not scientific ones.

Thanks for reading. Send us your questions and allow Linda and I to address them here. We would so much rather be writing about things that are of interest to you. Again, thanks for reading.
Dianne

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News & Notes

This Time of Year: Winter is widely viewed as a great time to buy a home. Sellers typically perceive demand at this time of year to be slow, and therefore Buyers can secure deals that may not be available during other times of the year. I spoke with the owner of a local moving company today, and she was breathless. She told me that they are so busy right now they are having a hard time keeping up…. What she is seeing in her business is an uptick in home purchases… and no wonder! Low interest rates/low prices/a few years of pent-up demand… tis the season!

If you want to take advantage of the annual winter-slowdown as a Buyer, here are some things you will want to do:

– Secure the cash for your down-payment.
– Check your credit score and correct any mistakes.
-Get to know your chosen neighborhood; have your Realtor assemble data on recent sales… in short, be prepared with the facts.
– Walk or drive around your chosen neighborhood. Talk to residents if possible…. Get an idea of what it’s like to live there.
– Be prepared to negotiate. While you can expect to secure a great deal in this market and season, listen to your Realtor regarding how far to go & not go… you want the home you fall in love with, and stepping over a certain line could alienate you from it’s current owners.

While rates are at near-historic lows, they are expected to rise. According to Pat Goodell and Academy Mortgage, rates are expected to rise before prices bottom… and rates affect your financial picture more than price. Here is a scenario that should interest you:

Say a couple wants a P & I mortgage payment today of approximately $1025. At 4.5% they could get a $202,000 loan today.

Here is what that same payment will get them at higher interest rates:

4.5% $202,000
7.5% $146,500
9.5% $102,000
12.5% $ 96,000

So… the point is that a 3% increase in rates can reduce our subject couple’s purchasing power by 25%.

I hope this information has been helpful.
As always, please feel free to call or email with questions, or to ask for help.
Happy house-hunting!

Very Best,
Linda

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Affordable Homes

Lake Oswego has a reputation for being a community of expensive, luxury homes. And, yes, those homes are abundant in Lake Oswego. But for the buyer looking for an affordable home, Lake Oswego should still be a consideration.

The RMLS has recently begun tracking affordability. What they are comparing is the median income of the metro area (currently $71,200) to the median sales price of the metro area (currently $215,000) and determining the percentage of the median income to make the house payment on the median house. In other words, if a buyer making the median income goes to qualify for a loan, he or she makes enough money to qualify for a house payment that is currently 166% of what the house payment would be if they purchased a home at the current median price. An index of 166 means that current median income can easily support the current median home price. Before the market turned, that purchasing percentage was just 88% (June of 2007). It’s pretty clear that our housing market in 2007 was extremely unaffordable for the average buyer. Today, it is much more affordable.

Affordablity Affordability
Index Index
Dec. 2010 166 Mar. 2007 95
Sept. 2010 155 Dec. 2006 105
June. 2010 148 Sept. 2006 101
Mar. 2010 145 June. 2006 97
Dec. 2009 141 Mar. 2006 107
Sept. 2009 140 Dec. 2005 113
June. 2009 30 Sept. 2005 121
Mar. 2009 138 June. 2005 129
Dec. 2008 125 Mar. 2005 133
Sept. 2008 109 Dec. 2004 144
June. 2008 98 Sept. 2004 149
Mar. 2008 103 June. 2004 140
Dec. 2007 99 Mar. 2004 162
Sept. 2007 94 Dec. 2003 152
June. 2007 88 Sept. 2003 149

How does Lake Oswego fit into this, with it’s million dollar mansions? Actually, pretty well. There are currently 71 properties for sale in Lake Oswego that are priced at $215,000 or less. The bulk of those are condominiums, but it is very possible to buy into Lake Oswego within the median household pricing.

Since beginning this blog I have on ocassion compared affordable housing in Lake Oswego to affordable housing in Sellwood, a popular neighborhood in Southeast Portland where I once lived. I have done this because the average consumer assumes Southeast Portland is affordable, just as they assume that Lake Oswego is not. The cost threshold I have used is $350,000. So, by my definition affordable is a home that costs $350,000 or less. I have not included condominiums or attached homes. Today in Lake Oswego there are 74 houses for sale priced at $350,000 or less. Sellwood has just 20.

The least expensive detached house currently for sale in Lake Oswego is priced at $159,000. It is a bank foreclosure. With 3 bedrooms, 2 baths, and a single car garage, it has 1625 square feet.

The least expensive detached house currently for sale in Sellwood is priced at $145,000. It is offered as a short sale. It has 2 bedrooms, 1 bathroom, no garage. It has 1078 square feet, 340 of which are in an unfinished basement.

Have a great week. If you’re in the local area, stay warm and enjoy the snow.
Dianne

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Looking for Red Flags

When I am showing houses, there are a few specific items I watch for. I guess I think of them as red flags: things that create an immediate concern if I see them.

From the curb:
The condition of the roof. Does the roof lay flat or are there waves of high and low areas? This is a sign that the roof is installed over additional layers of roofing material. When the the time comes to replace the roof, will it require a total tear off? What is the condition of the shingles? If they are wood, are they lifting and curling? On a wood roof, this might simply be a sign that the shingles need to be treated with preservative. More concerning on a wood roof is if the shingles are split and broken. On a composition roof, are there missing shingles? Is the material obviously deteriorating?
What is the siding made of? Specifically I am looking for composite siding that was widely used in the 1990’s and manufactured by various companies but commonly referred to as LP siding. I am familiar with the specific knot pattern used in the pressing of the product to look like wood. The other siding I am looking for is EIFS. This is a pre-manufactured stucco product that was widely used about the same time as LP, and usually installed incorrectly. Either one of these siding products immediately tells me that if the house is a candidate, we need to inspect the siding carefully.
Going inside, the electrical panel There are several brands of electrical panels with poor reputations. The most widely used one, and one that I see lots of, were manufactured by Federal Pacific. I have been told, in writing by a licensed electrician, that Federal Pacific panels have been unfairly targeted for failure by over testing and that if all brands of panels were scrutinized to such a degree they too would be found faulty. Having heard this, I have seen documentation that shows that Federal Pacific panels have a history of failure. This red flag, like the others, tells me we need to carefully inspect and investigate.
Older Homes Is there now or has there ever been oil heat? This implies an oil storage tank. This must be addressed prior to purchase. Are there single-pane windows? What insulation has been added to the home? Both issues are going to affect the energy efficiency of the house. Some older homes have been completely updated making these concerns a non-issue. Others have not. It could be a cost consideration in the purchase and livability of the house.
Drainage issues Especially in Oregon, at this time of year, it’s pretty easy to see if the yard has standing water or erosion on an embankment. Generally, drainage issues are highly correctable. It’s good to recognize them so that the right questions can be asked and inspections planned.
Home Owner’s AssociationsWhen buying a property in a Home Owner’s Association (and this is more than just condos and townhouses, many newer subdivisions have HOAs) you are buying into the association and need to be clear about what that means and how it will affect you. Make sure to understand the rules and regulations as well as the costs/budget of the HOA. As part of the home inspection process, a property within an HOA will have inspection considerations that are specific to the HOA including review of the rules and regulations, review of the budget and reserves, as well as review of the Conditions, Covenants, and Restrictions. I also recommend getting a copy of the HOA meeting notes for the previous 12 months. If the HOA has problems, the members of the HOA will be talking about them at the regular meetings.

I am by no means an expert on the items on this list. But I do know enough that when I see an issue, I want to bring in an expert to give their opinion about problems or corrections. And really, the inspection process begins the first time you see a house. Having a few key items to quickly review as you look at houses should make the process easier.

So that’s it. My handy little list of red flags.
Dianne

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Mortgage and Market Tidbits

  • Predictions – Both Fiserv and Moody Analytics are reporting that home prices have already leveled out in one of every four metro areas. Both are also saying that they estimate price stability will characterize 3/4 of US markets by the end of 2011, and they are even saying that they are expecting 100% to stabilize by the end of 2012.
    Fiserv in particular is saying that markets already stabilized include San Diego, Washington DC & San Francisco.  They expect markets to stabilize by the end of 2011 in: Minneapolis, New York City, and Portland Oregon (!!!).  Then comes the bad news as their predictions of the markets in Miami, Phoenix & Las Vegas, they say, will not stabilize till 2012.
  • Help from Uncle Sam “Getting Green” –  You may or may not know about the FHA’s new/upcoming “Power-Saver Loan”.  This loan is part of the government’s “Recovery Through Retrofit” program promoting energy efficiency and creating green jobs. Stay tuned for more details as this program is in the final stages of development and a select group of lenders will be qualified to help Buyers take advantage of a rare opportunity to be patriotic while simultaneously obtaining funding to get the green home of their dreams!
  • Home-Buyer FAQ’s Answered – So many questions so little time… But the NAR and HUD have recently released three free videos covering the basics of buying a home.  Shopping for a Home, Shopping for Your Loan, Closing the Deal.  All three take a total of approx. 30 minutes to view, and hey, your questions will be answered!!  Visit youtube.com/HUDchannel
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The Pros and Cons of Corner Properties

In the many years I have been working with buyers, I have only run into a few who would not consider buying a house on a corner lot. So this is not a heated controversery. It is, however, something to think about in your home search. Here is simple a comparison of the pros and the cons of buying a home on a corner lot:

The Pros
* Corner lots are often bigger because they not only include a yard, but the large side yard of the adjacent street.

* Corner lots are more private because they have one less neighbor immediately next door.

* Corner lots can allow unusual landscaping such as installing a circular driveway.

* Corner lots can allow easier access to the back yard for storing a RV or a trailer behind a fence.

* Corner lots can allow more sunshine into the house itself because there are fewer homes closeby that potentially can cast shadows.

* Corner lots allow you to have more on-street parking adjacent to your home.

Here are the Cons

* Corner lots mean more landscape maintenance that is visable from the street.

* Corner lots are potentially create a smaller back yard if the lot is mostly outfront and to the side of the house.

* Corner lots can deminish your privacy in your back yard if there is visability from the adjacent street or if the lot is small enough that people out on the sidewalk can hear you in your back yard.

* In the case of sewer improvements or sidewalk maintenance where local authorities assess repairs based upon the per foot of street frontage, corner lots can be more expensive to own.

* Corner lots can potential have move light exposure at night from street lights or head lights.

I think that for every buyer who dislikes a corner lot there is a buyer who prefers one. So don’t let the corner lot issue be your primary criteria when buying a home, unless you have exceptionally strong opions about the pros and cons above. I personally live on a corner lot and I LOVE it. My lot has large hedges on the two sides with a circular drive between the two streets. I pull into my driveway and I feel like I’ve come home to my own private park. Ray Hartshome, a partner with Chicago’s Hartshome Plunkard Architecture, calls a corner home “a rare home”. He says that a corner home is “a rare home that’s distinctive in a world that makes distinctive homes more valuable”. Perhaps that statement goes a bit overboard, but I do like the sentiment.

Dianne

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Mortgage and Market Tidbits

  • Local Area Trends- According to the latest RMLS Market Action Report, comparing November 2010 with December 2010, a few interesting facts emerge-  Average Sales Price increased in the Portland Metro area by 2.2%, and Closed Sales increased by 14.3% which is the highest monthly level since June.
  • Rates- There is some indication that this increase was due to interest rate swings which may have persuaded uncertain buyers to take action. After remaining for weeks at historic lows, rates jumped for a short time to over 5%. They have since gone back down again to about 4.75% but the temporary increase may  have  convinced  buyers that low rates won’t be around forever.  According to MBS  Quoteline, the volatility of rates which has surfaced in the first weeks of the new year is of course due to shifting economic factors. Prior to Friday’s Employment report, nearly all the economic data was stronger than expected which impacted mortgage rates negatively.  Rates improved after the employment data though, and ended the week nearly unchanged.
  • Pat Goodell of Academy Mortgage says:

    • The Monthly Inflation reports and Retail Sales reports  were not as strong as hoped so rates have stabilized below 5%.  But all indications are that there will be stronger economic data coming out in the next few months which will impact rates negatively again.  There is no reason to expect that rates will continue to be as low as they currently are and most expectations are that by the 2nd half of the year, they will have increased to over 5% again.

  • Portland Metro’s “Grade” To Improve?- The mortgage insurance companies identify cities according to their “risk” of declining values. One mortgage insurance company just upgraded 18  cities nationwide (and downgraded 3). They made no change to Portland yet but it’s a positive sign that they are seeing stronger values in 18 cities nationwide and one mortgage insurance rep did say he expects to see Portland upgraded in the near future.
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Distressed Homes and Home Owners

West Waluga Park
I know I wrote a post just recently about foreclosures and short sales, but a ton of new information has come to my attention. This information is really useful, so I decided to stay with the topic for this week.

Running the Numbers
I spent a little time looking more closely at just how foreclosures and short sales are impacting the market here in Lake Oswego. I easily figured out that the two types of distressed housing make up about 20% of the current listings. But what I got to thinking about was a more specific breakdown of the two, and finding out which are actually selling. Here is what I found:
* There are currently 548 properties for sale (these are including all residential: condos, town houses, and detached)
* There are currently 80 sales pending (offer accepted and in escrow)
* In the last 6 months 324 properties have sold and closed. At this rate, it will take it will take a little more than 10 months to sell the current inventory.
* There are 33 Bank foreclosures for sale (6% of the inventory), 17 are currently in escrow (21% of the properties in escrow), and 56 have sold in the last 6 months (which represents 17% of the closed transactions).
* There are 73 short sales currently in the inventory (13% of our LO market), 14 are pending sales that have not closed, and truthfully may never close (17% of the properties in escrow), and just 19 that successfully closed in the last 6 months (just 5% of actual, closed transactions).

I think I had a sense of this: that there are lots of short sales out there but that not a lot of them actually become a sold property. It is clear in the numbers. Short sales represent 13% of the inventory but just 5% of the sales. Whereas foreclosures represent just 6% of the inventory, but are 17% of the sales.

East Waluga Park

If you or someone you know is a distressed homeowner, pay attention NOW.

There is Federal stimulus money that has not yet been used. So far it feels like it’s all gone to the banks and been of little or no help to actual home owners. This is about to change. Beginning December 10th and ending in mid January, you can apply for mortgage payment help. The program is called MPA (Mortgage Payment Assistance). In Oregon 5000 households will receive help. Here is how it works. Go to www.oregonhomeownerhelp.org and apply. Applying for this help is going to be very similar to applying for a mortgage. You will have to submit bank statements, tax returns, etc. Households will be deemed qualified or not. All of the qualifying households will be entered into a lottery and names will be drawn. The 5000 house holds selected will have the Federal Government pay their mortgage payments for 12 months. The money will be considered a no-interest loan that is forgiven 20% per year for 5 years. So if you stay in your home for 5 years it will be 100% forgiven. There a lots more details, and I am not an expert. If you or someone you know needs this help, go to the website and get the information. Households can begin applying on December 10th.

I know the whole bailout is super controversial. But households in foreclosure is a tragedy that affects families, neighborhoods, and our entire economy.

Helpful Resources:
As part of my continuing education to renew my real estate license I took a 7-hour class yesterday on Short Sales and Foreclosures. While lots of good information was given out, I think I most appreciated getting come contact info for home owners who are financially distressed. Here are some good resources:
* You can find foreclosure avoidance counseling at www.hud.gov/foreclosure
* There are numerous scams preying on distressed homeowners. If you are tempted to hire services from a company who claims to be in a position to help you, check them out first by going to www.fanniemae.com/homeowners/beware-of-scams.shtm , www.ftc.gov/bcp/edu/puts/consumer/credit/cre42.shtm , or http://redtape.msnbc.com/2008/09/post.html
* Check out the Federal Government’s Making Home Affordable Program at http://MakingHomeAffordable.gov
* In Oregon check out www.foreclosurehelp.oregon.gov

Putting Things in Perspective
Every month households receive notices of foreclosure. These numbers are for the month of October 2010:
Clackamas County 1 in 402 households received this notice
In Las Vegas, in the same month, it was 1 in 6 households.

I hope you find this useful. Don’t hesitate to give myself or Linda a call if you have any questions.
Dianne

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More Market Data

  • A comparison of Sept ’10 and the previous month in Portland Metro shows an increase in Closed Sales of 1.3%
  • Average sales price in Portland Metro fell by 3.5% comparing  Sept. 2009 with Sept 2010.
  • Comparing the 3rd quarter of 2009 with 3rd quarter 2010, Closed Sales in Portland Metro dropped 24.7%
  • Comparing the 3rd quarter of 2009 with 3rd quarter 2010, Metro Listings increased by 1.2%
  • Average Metro Closed Price in Sept 2010 was $279,900
  • Average Lake Oswego/West Linn Closed Price in Sept 2010 was $432,200
  • Metro “Time on Market” for Sept 2010 was 131 days
  • Lake Oswego/West Linn “Time on Market” for Sept 2010 was 186 days
  • Metro Active Listings as of Sept 2010 was 14, 714
  • Lake Oswego/West Linn Active Listings as of Sept 2010 were 1,025
  • From Oct 1, ’09 to Sept 30 ’10, Lake Oswego/West Linn Average  Sale Prices declined by 9.3%
  • Portland Metro saw 1,399 Closed Sales in Sept. 2010
  • Lake Oswego and West Linn saw 71 Closed Sales in Sept 2010
  • All data derived from RMLS Market Action Report