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Here’s Part 1 about the housing market in Portland, Oregon for Q3 2009. Part 2 will appear on Sunday.
HOUSING APPRECIATION
Portland State University issued their Third Quarter 2009 Real Estate Report indicating which areas showed appreciation during the most recent quarter of 2009 – Q3:
- Courtesy Portland State University. Click on Image for Better View
SINGLE FAMILY RESIDENTIAL
The National Association of Realtors® reports that 80% of the housing markets across the U.S. had falling prices in the single-family residential housing sector.
Portland, Oregon was not immune to those falling prices, and NAR® reports that Portland for the third quarter of 2009, had prices dropping by -12.2%.
“During the third quarter, 123 out of 153 metropolitan statistical areas reported lower median existing single-family home prices in comparison with the third quarter of 2008, while 30 areas had price gains.
The national median existing single-family price was $177,900, which is 11.2 percent below the third quarter of 2008; the median is where half sold for more and half sold for less. Distressed sales – foreclosures and short sales – accounted for 30 percent of transactions in the third quarter, which continued to weigh down median home prices because they sell at a discount relative to traditional homes. (Portland’s median sales price dropped by -10.7% from $280,000 to $250,000 in October 2009).
“The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, but we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market,” Yun said. “Foreclosures will continue to come on the market, but rising sales from the expanded tax credit should stabilize home prices by next spring and help to stem future foreclosures.”
In another recent report, across the entire Portland metro area, the market as measured by inventory, is the strongest in the $150,000 to $299,999 price range. That market segment has seen a robust sales pace over the previous 12 months (a 58% share) which has been propped up by the government’s $8,000 First Time Home Buyer Tax Credit. Homes price in the $350,000-$499,000 range have seen significant inventory increase in recent years, up to roughly 9-10 months of inventory in the Third Quarter of 2009 from only 7-9 months during the 2007 peak. However, it is a marginal improvement over 2008 at the same time. The most significant change in the market has been the houses over the $500,000 price. Inventory at the peak of our housing market for that price point was at 12.6 months to over 20 months for Q3 2009.
CNN recently reported that we still have too many houses on the market for sale. According to their recent report based on numbers from the Census Bureau:
“…a full-fledged housing recovery will remain elusive until the market can absorb all the houses and apartments that were built during the housing boom. And on that front, progress has been slow.
About one in seven housing units was vacant in the third quarter, according to the Census Department. This year has registered the highest reading since the government began collecting such data in 1965.
Part of the glut comes from a rash of foreclosures as strapped borrowers fall behind on their mortgages.
But rental apartments are emptying out at a record clip as well, as a spike in the jobless rate and a decade of subpar wage growth have sent many Americans back home to live with Mom and Dad.”
ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No 
Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws. Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
Portland
It has been awhile since I posted any information on apartments (multi-family) units here in Portland. This time I am focusing on the three areas my blog covers: RMLS#147 Lake Oswego, West Linn, RMLS#148 West Portland, and RMLS#151 Tigard. First, however, here’s the latest information from Western Real Estate Business about Portland:
WESTERN SNAPSHOT, OCTOBER 2009
Portland, Oregon, Multifamily Market
1. MARKET MOVES
Three significant Portland multifamily buildings delivered downtown in the first two quarters of 2009: Cyan/PDX (352 units developed by Gerding Edlen Development), the Ladd (332 units developed by Opus Northwest) and the Riva on the Park (294 units developed by Trammell Crow). Downtown Portland has historically been a healthy submarket for multifamily and much recent construction has been centered there, so the area is now becoming very competitive. All three of the aforementioned projects are also pursuing LEED certification, which appeals to Portland’s urban tenant.
2. MARKET MEASURE
Vacancy is an important factor in Portland’s multifamily market as it is an indicator of the overall market’s health. The vacancy rate has been trending upwards in recent quarters, which should continue in the second half of the year. It’s important to note that the increase in vacancy is due to economic pressure on tenants, not migration of people out of the metro area. Expect vacancy to regain its footing in the summer of 2010 or when economic conditions improve.
3. THE MARK OF A MARKET
Portland’s Urban Growth Boundary (UGB) sets it apart from other multifamily markets in the West. The UGB has prevented overbuilding in both the single-family and multifamily markets in the last 5 years. So despite the recession, Portland’s apartment market has remained relatively healthy and under built, aside from some significant building downtown. This leaves Portland’s multifamily market in a strong position and set for a robust recovery when the economy improves.
— Robert Black is an associate vice president specializing in multifamily investment sales at NAI Norris, Beggs & Simpson in Portland.
Norris Beggs & Simpson reports that:
Landlords are doing everything they can to attract the fewer active renters in the market. Concessions today in certain submarkets are sizeable, including up to two months free rent on a 13-month lease for some new properties in the downtown area. Renters looking for a new place to live are shopping around for the best deals they can get, and existing tenants are also tuned in and looking for bonuses to extend their leases on expiration.
Despite the impact of the recession on the apartment market, Portland is in a good position for the upswing. U.S. News & World Report recently named Portland and its commercial market one of the ten cities “primed for a real estate recovery,” due to its green economy and overall economic health. When the job market and overall economy starts to improve, Portland’s multifamily market will be in a strong position for a rebound.
APARTMENT – MULTI-FAMILY STATS (Click on the RMLS# for property specifics and will only be in effect for a limited number of days):
| APARTMENTMulti-FamilySTATS | ||||
| RMLS #147 Lake Oswego | RMLS# 147West Linn | RMLS#148West Portland | RMLS#151Tigard | |
| Q1 | ||||
| # Complexes Sold | 0 | 0 | 2 | 0 |
| RMLS#8106826 | ||||
| RMLS#8101633 | ||||
| High Sold $ | $1,050,000 | |||
| Low Sold $ | $792,500 | |||
| Average Sold $ | $921,250 | |||
| Days on Market | 62 | |||
| % of Sold Price vs. List Price | 87.24% | |||
| Q2 | ||||
| # Complexes Sold | 0 | 1 | 5 | 1 |
| RMLS#8071839 | RMLS#8044472 | RMLS#8048377 | ||
| RMLS#9016980 | ||||
| RMLS#8101280 | ||||
| RMLS#7083661 | ||||
| RMLS#8106074 | ||||
| High Sold $ | $525,000 | $825,000 | $280,000 | |
| Low Sold $ | $525,000 | $320,000 | $280,000 | |
| Average Sold $ | $525,000 | $447,957 | $280,000 | |
| Days on Market | 300 | 276 | 275 | |
| % of Sold Price vs. List Price | 95.45% | 81.1% | 93.65% | |
| Q3 | ||||
| # Complexes Sold | 0 | 0 | 1 | 1 |
| RMLS#9008727 | RMLS#9011509 | |||
| High Sold $ | $251,400 | $249,000 | ||
| Low Sold $ | $251,400 | $249,000 | ||
| Average Sold $ | $251,400 | $249,000 | ||
| Days on Market | 154 | 189 | ||
| % of Sold Price vs. List Price | 100.6% | 89.89% | ||
| FOR SALE NOW | ||||
| # Complexes For Sale as of10-28-09 | 5 | 8 | 32 | 10 |
| Source: RMLS |
How To Calculate The Cap Rate
Short for capitalization rate, Cap Rate is one of the most widely used formulas by real estate investors when analyzing investment property. It’s a component of return on investment for an investment property as it relates to the Purchase Price and based on the amount of Annual Net Operating Income the property will yield (not including mortgage payments or considering income tax) in proportion to the purchase price of the property.
Cap Rate is calculated by taking the Annual Net Operating Income of the investment property and dividing it by the Purchase Price.
So, the Cap Rate formula is:
Cap Rate = Annual Net Operating Income (not including mortgage payments)/Purchase Price
Note: when calculating Cap Rate, a higher resulting number is better.
Cap Rate Example: Let’s say you purchase a property for $100,000 that produces an annual net operating income of $5,000; this property would have a Cap Rate of 5% (5,000/100,000). Based on this calculation the property will generate 5% of the purchase price in income (not considering income tax) per year. If you were looking at another property with a purchase price of $100,000 that produced an Annual Net Operating Income of $8,000, this would obviously be a better deal with a calculated Cap Rate of 8% (8,000/100,000).
Note: A typical Cap Rate for investment properties ranges between 5 – 8% with an 8% cap rate typically viewed by seasoned investors as the more desirable type of investment.
Source: In part – InvestorLoft
ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws. Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
One of the phrases we hear all the time at Re/Max equity group and one which is constantly repeated by our Managers and company attorney is “When in doubt, disclose, disclose, disclose. No one ever got sued for disclosing too much”.
Recently, I received a call on this subject from an owner in another city in Oregon. I indicated to him when I submit a property disclosure form to my sellers, I always tell them to be honest in what information they will be providing on the form. If there are any known deficiencies, they need to indicate those. If there is a “yes” to a question that needs an explanation, they need to explain the reason for, or if, something happened and how it was corrected. Never, however, do I want them to say something they’re not absolutely certain of. I remember when the disclosure statement became mandatory and there had been an owner that said there was insulation in a certain wall. Upon opening up that wall for whatever reason by the new buyer, there was no insulation and a lawsuit ensued. In other words, if you’re not sure there is insulation in all the walls, don’t say there is in fact insulation in every single wall. However, if you know the alarm system isn’t working and you say unknown or N/A on the form, that’s not good enough. You’ll need to explain what the problem is, if it’s been repaired, or what the current condition of that system is, etc.
We Realtors® can never fill out the form for the seller or provide the seller with the correct answers. I can explain what information the question is asking for or is needed, but it is your responsibility as a home owner to complete all the information truthfully and to the best of your knowledge. If a property sells then sale fails due to a deficiency in the condition of the house, when it comes back on the market a new disclosure needs to be completed by the seller and given to a new buyer disclosing that deficiency. With houses being on the market for such a long time, in some cases up to a year, a new disclosure form needs to be completed during the time the house has been for sale and possibly vacant. Conditions of the home may have changed within that year the house has been on the market.
Now comes word from our National Association of Realtors® that the number one complaint and lawsuit is because a home owner or agent did not properly disclose the correct information to a buyer. Disputes involving disclosure of a property’s condition now exceed disputes over agency issues, a catchall classification that includes buyer representation and breach of fiduciary duty, and issues involving the federal law intended to protect consumers from being overcharged at closing comes in third.
Water intrusion and mold problems that often follow are a major issue. Disputes concerning structural defects are also extremely common. And issues concerning septic and sewer systems, misstatements about square footage and “as is” clauses also generate more than their fair share of legal problems.
Many of these disputes arise when the seller is a bank. The problem with water and mold is linked to the foreclosure crisis and has become a larger issue due to the number of houses not being maintained or sitting empty for long periods of time.
Recently I read there are new laws for landlords renting their properties. One of those new disclosures is that landlords must disclose whether the rental is in a 100-year floodplain. Just because you are renting out your property, doesn’t excuse you for making disclosures to a new tenant as well.
Disclosure is an important aspect of a successful real estate transaction for all involved. If you have any questions on disclosure, seek the advice of a real estate attorney.
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
HUD’s most recent quarterly report was issued the other day. Here are the highlights about metro Portland, Oregon:
- During the 12 months ending June 2009, job losses totaled 55,400 in Oregon. Oregon accounted for one-half the 38,200 manufacturing jobs lost in the region, due mainly to layoffs at Daimler AG and Intel Corporation.
- Regionwide employment declines occurred in nearly every sector, with two-thirds of the job losses recorded in the construction and manufacturing sectors. Government, education and health services, and information were the only sectors to record employment gains, up 21,000, 20,300, and 900 jobs, respectively. For the 12 months ending June 2009, nonfarm employment averaged 1.7 million jobs in Oregon. The regional average unemployment rate increased to 7.5 percent during the 12 months ending June 2009 compared with a rate of 4.8 percent for the same period in 2008. The average unemployment rate, which increased in every state in the region, was 9.4 percent in Oregon.
- Oregon registered the greatest loss in construction jobs, down 14,800 jobs.
- Oregon sales market conditions also remained soft during the 12 months ending June 2009. According to data from the local multiple listing services, the number of new and existing single-family homes sold in the 11 largest markets in Oregon totaled 35,900, a 29-percent decline compared with the number sold during the previous 12 months. During the same period, the average sales price decreased by 13 percent to $271,900. In the Portland-Vancouver-Beaverton, Oregon-Washington metropolitan area, the number of new and existing homes sold totaled 21,100, down 34 percent compared with the number sold during the 12 months ending June 2008, and the average price decreased 11 percent to $298,800.
- Oregon, permits totaled 5,900, a decline of 2,100 homes, or 18 percent, from a year ago.
- In Oregon, 3,400 multifamily units were permitted, 1,200 fewer than the number permitted during the 12 months ending June 2008.
- In the Portland-Vancouver-Beaverton metropolitan area, rental housing market conditions were balanced in the second quarter of 2009. According to Reis, Inc., the apartment vacancy rate was 5.8 percent, up from 5 percent in the second quarter of 2008. The average rent was essentially flat at $750 over the same period. Because of limited new apartment construction, rental markets in the Oregon metropolitan areas of Medford, Salem, and Eugene-Springfield remained balanced with apartment vacancy rates of 4, 5, and 5 percent respectively. A year ago, the vacancy rate was 4 percent in all three metropolitan areas. Between the second quarters of 2008 and 2009, average asking rents in these three areas increased between 1 and 2 percent, to $590, $620, and $700, respectively.
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
There’s a new category on this blog’s side bar now called “Rental Stats, Income Properties and Vacancy Rates”. I’ve written several articles about investment income properties and plan on doing so in the future. Therefore, a new category has been started for this topic.
The demand for rentals either by renters or investors is on the rise. I’ve written many posts on the vacancy rates here in our Portland 
metro area. However, there may be some owners still having trouble renting their properties.
Investorloft has some great information on their website to assist you. Here is some information I’ve gathered to help you as well:
- Photos. Blurry doesn’t cut it. And if you don’t have photos on your listing, that’s even worse. Photos are the difference between lookers and renters. Take the time to get some great photos of your rental property. Big backyard for dogs? Take a picture. Hardwood floors? Take a picture. New appliances? Take a picture!
- Incentives. If your rental property has been vacant more than 45 days, it’s likely you’re at the threshold of your estimated vacancy rate. It’s time to get creative, and that’s where incentives come in. What are you willing to do in order to get a tenant in place? One month free rent, utilities paid for first month, pick up the water bill, free lawn maintenance, new ceiling fans, a brand-new garage door opener, or option to renew at 2nd year for same rate all make enticing offers for prospective tenants.
- Be a Craigslist Snoop. If you’re a self-managing landlord or find that your property management company is missing the boat with securing tenants for your rental property, start snooping on your own. Visit Craigslist and enter your zip code in the rentals section and see what your neighboring homes/apartments/condos/duplexes have that you don’t. You can also see how you compare to your neighboring rentals and whether you’ve got some work to do to be competitive or if yours really is the nicest.
- Re-write your advertisement. Have a friend or family member help you. Being too close to the property may hamper your description and fresh eyes can help.
- Visit a similar rental in your area. Does it have more curb appeal? Does your rental need a little sprucing up to attract nicer applicants? Sometimes just some flowers in the front yard can add that little homey touch that is needed. See what other rentals are going for and consider whether your rent should be raised a bit.
- Charge an application fee. If the applicant passes you can always credit that amount back out of their first month’s rent. But an applicant who can’t come up with an application fee will not be able to come up with rent money.
- Put up a “For Rent” sign in the front yard. Many prospective renters spend the weekend driving around neighborhoods they would like to live in looking for those signs.
- Keep Current on local and Federal laws. There’s a new law that protects renters after a property has been foreclosed upon. You can read it here.
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
Portland has a low apartment vacancy rate compared to the rest of the nation and comparing most cities on the West coast. Landlords locally, however, have already reduced rents drastically and are offering lots of concessions, especially those high-end apartment units, just to get their properties rented.
According to a new report by the CoStarGroup:
“The national multi-family vacancy rate in the second quarter 2009 was 10.6%, according to the Department of Commerce’s Census Bureau. The Census Bureau said the rental vacancy rate was higher than the second quarter 2008 rate (10%) and higher than the rate last quarter (10.1%). Multifamily vacancy was higher in the U.S.’s principal cities: 11.2% up from 10.4% a year ago. That compared to a 10% rate in suburban areas.
Among regions, the rental vacancy rate was highest in the South (13.8%) and lowest in the Northeast (7.1%). When compared to second quarter 2008, the rental vacancy rate was higher in the West, while rates for the other regions were not statistically different from their respective rates a year ago.”
Five Lowest Vacant MSAs (multifamily):
- Albuquerque, NM: 5.6
- Boston, MA: 5.6
- Hartford, CT: 5.6
- Louisville, KY: 5.0
- Portland, OR: 2.9
From Western Business Magazine comes this report:
“Even in the face of high unemployment, Portland remains a viable option for multifamily investing. Its apartment market is certainly not immune to current economic conditions but seems to be holding its own compared to larger metro areas. The first half of 2009 has been slow with transaction volume down, mainly due to the lack of buyer confidence and the uncertainty in the lending market. Vacancy rates are slowly increasing as unemployment numbers rise, prompting some landlords to consider rent concessions on properties located outside of core locations. Current market conditions have forced apartment owners to focus significant attention on tenant retention and customer service.”
The most recent Apartment Report from Portland State University for Q2 2009 has just been released this week and states:
“…..the overall multifamily vacancy rate has increased in the second quarter to 5.03% compared to 3.46% this time last year, which is still much lower than other markets. The average rents for the quarter are $682 ($0.97/SF) for a 1BR/1BA, $720 ($0.81/SF) for a 2BR/1BA, $876 ($0.85) for a 2BR/BA and $972 ($0.78) for a 3 BR/2BA. These numbers are up slightly from the previous quarter. Average 2BR/2BA new units rent for $1,200 per unit, an increase of $21 over last quarter. Seasoned 2 BR/2BA units rent for an average $824 per unit, which is an increase of only $2 over last quarter”.
However, as we head into Fall and Winter along with our shadow inventory of residential properties, it will be interesting to see how many more houses ultimately will become rental units. Further, there are condos that have now been foreclosed upon in the Pearl District and along Portland’s Waterfront that could ultimately wind up in the rental pool that will change our vacancy rates.
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
Many people are buying foreclosures and perhaps don’t know whether or not those houses at one time had been drug labs. In addition, meth use is on the rise in Oregon despite efforts to keep needed supplies behind the counter and locked.
A while ago, I attended a meeting conducted by the Oregon Department of Human Services about meth labs in Oregon. Most meth labs are in rental properties, hotel and motel rooms, and portable meth labs can be in cars. The cost to clean up an average 2 bedroom, 2 bath 1000 sq. ft. house can cost easily between $6700-7500.
Courtesy of dark_kasdachnah
Here are some actions you can take to protect a rental property:
Before Renting Your Property
- Make sure any rental application you receive is completed.
- Conduct a complete background check for each adult including their rental history, employment history, credit report and perform a criminal background check.
- Meet every adult and require picture identification
- Pay attention to appearance and behaviors.
- Your rental agreement should address illegal activity and the tenant’s responsibility for conduct on your property
After Renting Your Property
- Visit your property often
- Talk with neighbors and ask them to contact you with concerns
- Be aware of possible drug lab indicators such as: excessive garbage, red stains in the kitchen and/or bathrooms, increased activity – especially at night, paranoid or odd behavior, blacked out windows, excessive home security, chemical odors, complaints from neighbors.
The Cost of Clean-up
As a property owner here in Oregon, you are responsible for the cost of clean-up of an illegal drug lab. In addition, there may be loss of revenue, property damage, decreased property value, dangerous tenants, liability and loss of respect from neighbors. DO NOT enter the property if you suspect a drug lab, call the police.
Before you Sell Your Property, Clean-up and Disclosure of a Drug Lab
Our Property Disclosure in Oregon requires a seller to disclose whether the property has ever been used as an illegal drug site. In addition, a “Certificate of Fitness” will be required when you decide to sell that property.
Here is DEQ’s website for information on meth clean-up requirements and how to obtain the “Certificate of Fitness” from the State of Oregon.
Recently, ABC News ran a story about a little girl who became quite ill at a home her parents purchased not knowing the house had been a former drug lab. Some states don’t require disclosure of that fact, but Oregon does. Also, at the meeting I attended, even though DEQ provides a Certificate of Fitness and even if the property has been cleaned up, DEQ stated that meth never does completely go away.
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
A few days ago I wrote a post on the multi-family segment of real estate in our marketplace and vacancy rates. As our residential market numbers indicate with high inventory, the multi-family/apartment inventory remains high as well not only in Portland, but throughout the U.S.
The greatest number of sales for Q1 2009 occurred in NE Portland and for April 2009 that area along with SE Portland seemed to have the most sales, although certainly not in large numbers. Once again, the sales for multi-family investments, as well as residential sales, are happening in the closer-in neighborhoods of Portland.
Here is my multi-family Q1 2009 and April 2009 stats update for Portland and the surrounding areas from RMLS™.
ALL ABOUT…..Portland.Oregon.Real Estate, is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. © Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws. Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
Portland
Real estate has been a good investment over time. Because of our current financial crisis many people are questioning that statement today. But long-term appreciation still has been good and you just have to know where and when to buy. Like the old adage goes….location, location, location…is still very true today as it has been in the past. Not only is location key but it also depends on the economic picture of that location at that time. Location and timing should be considered along with whether there is an affordable, but low supply of adequate housing supply.
National data:
1970-1979 = 142% appreciation
1980-1989 = 52% appreciation
1990-1999 = 45% appreciation
2000-2008 = 42% appreciation
2009 Q1 Vacancy Rate
The national apartment vacancy rate rose to 7.2 percent in the first quarter of 2009, and was up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier. Behind the rising vacancy rate is a build-up of available apartments. The number of vacant apartments added was 31,878 units in the first quarter. This was the largest amount of excess apartments the sector has seen since the first quarter of 2002 and does not include empty condos for rent. Asking prices are falling along with a huge inventory available present some outrageous buys for the the smart and savvy investor who is able to take advantage of this economic downturn.
Vacancy Comparison Chart from Norris Beggs & Simpson
Here locally, Norris Beggs & Simpson’s First Quarter 2009 report shows that multifamily vacancies crept up to 4.96% in the First Quarter 2009 for the Portland metro area. The report states that the overall vacancy rate a year ago was 3.80%. The Clackamas/Oregon City/Milwaukie sub-market had the highest vacancy at 6.00%, nearly two percentage points up from last quarter. Vancouver’s vacancy decreased more than a percentage point, however, to 4.81%. Southwest Portland had the lowest vacancy at 4.28%. Average rental rates in all apartment types rose slightly, between $2 and$5, during First Quarter. The Downtown Portland and Wilsonville sub-markets saw significant price increases in certain apartment types. The price of a 2 BR/2 BA unit downtown increased by $26 to $1,800, and a 3 BR/2 BA in Wilsonville rose by $18 to $868. The overall average to rent an apartment in Vancouver was $679, the lowest of all sub-markets. For their full report, you can view it here. Recently, I spoke to a local property manager in Lake Oswego who said people were still looking for rentals and that demand had dropped off only slightly due to the economy but that their supply of available houses for rent has increased.
2008 Q4 Vacancy Rate
The U.S. Census also just released the Q4 2008 vacancy rates and Oregon’s vacancy rate for the first quarter of 2008 was at 4.8%, by the end of 2008, the 4th quarter rate jumped to 6.3%. From the calculatedriskblog.com comes the chart of vacancy rates throughout the U.S. for the 4th Quarter 2008 as well and it increased to 10.1% up from the third quarter’s 9.9%. Another posts says there are 820,000 excess rental properties in the U.S. and that houses are competing with apartments as rentals for two reasons: 1) homeowners who can’t sell their homes (or are “waiting for a better market”) are renting their homes, and 2) many REOs are being purchased by cash flow investors as rentals helping to increase rental supply and push down rents.
Are you waiting to invest before everyone else decides its the time best time to buy? Are you waiting for prices to bottom? No one knows when that will happen or when. According to the Norris Beggs & Simpson report:
“The federal stimulus package got off to a bit of a bumpy start and its impact is still unknown, but it is encouraging to see economic stimulus action being taken, and investors may have some reason to be optimistic. Smaller, local banks will benefit from the stimulus, allowing them to clear the overhang of single family development inventory by extending lower interest rate loans. Low mortgage rates, along with the $8,000 tax credit for first-time home buyers, are stimulating the balance of the single-family market and sales are picking up for homes under $350,000. On the multifamily side, Fannie Mae still has the lowest rates, but these rates come with more scrutiny on the borrower and property.”
Rental Boom Areas
Where will the next rental “boom areas” be? Look around Oregon first or the state you live in for investment properties. Use the following guide to determine whether it is a good time or location to buy:
- Low Housing Prices – how do the prices stand as compared to the potential for rental income? If a rental unit can be purchased so that the monthly rent covers the mortgage tax payments, then this makes for a good start on the investment road.
- Stable economy – what’s happening in our State or in our local economy? Look for economic growth as compared to the over-all U.S. economy and how and where it’s headed.
- New jobs/plants/Federal spending planned – are there new corporations moving in to the area? Are current companies expanding or contracting? Are there job cuts or growth going to be occurring in the near future?
- Rental vacancy rate - How’s the rental inventory? Is there a lot of it? Is there too much of it? The vacancy rate lets you know how long your property will be on the market and how much rental income you’ll be able to pull in each month. Will you have a positive or negative cash flow each month and how much?
Our economy is starting to show signs of improvement. How long it will take for it to get better is anyone’s guess. However, that day will come again soon and when the economy does start a definite uptick there will be many more investors coming back into the market place as they know real estate is still a good investment.
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
Rents in the Portland Metro area have increased significantly since 2005 while vacancy rates have remained fairly low. However,vacancy 
rates did increase in the fourth quarter of 2008 to 4.71% compared to 3.31% this time last year. The Wilsonville area had the highest total vacancy rate of 6.95% while the Gresham/Troutdale area had the lowest vacancy rate of 3.33%. Forecasters say that there will be an increase in cap rates, which will decrease the market value of apartment buildings, especially those that were recently purchased.
Overall average rents for all apartments in the Portland metro area, from studios to 3 bedrooms, 2 baths, both new and older, is $0.88 per square foot. An average 2 bedroom, 2 bath new unit rented for $1,074 per unit or $0.98 per sq. ft., which was an increase of 24% over 2007 asking rents. 2 bedroom, 2 bath units older than one year rented on average for $820 per unit or $0.81 per sq. ft., which is an increase of nearly 15% over last year.
The chart below, based on the figures from the Barry Apartment Report, shows the inverse relationship between the median sales price and the cap rate, showing how big the housing bubble has been and how we need to get closer to the 2002 cap rate to get to more normal valuation levels.
According to recent apartment sales reported by Norris, Beggs & Simpson, the average sales price is $92,594 per unit.
Most sources agree that the housing crisis and the single family residential market is affecting the multifamily market, as the “shadow inventory”, or the amount of available single family rentals as well as the rental of unsold condominiums, has increased due to problems in those segments of the real estate market. Currently there is 2.5 to 3.5 years of inventory in the condominium market. Also, some homeowners have put their houses up for rent in an effort to hold on to them. Some previous homeowners are returning to the market as renters after having lost or rented their homes, while other would-be-renters have chosen to live with relatives or roommates, making 2BR apartments very popular. In my Market Update post in January, I reported on the large number of rental/income properties currently for sale.
I recently posted financing information for investment properties. You can view that post here.
Just In.….FHA lifts ban — Here’s some unexpected news for investors who own rental apartment properties and are having trouble financing or refinancing because of the credit freeze: FHA has decided to provide more long-term multifamily mortgage money — at least for the next six months.
Source: PSU Center for Real Estate
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
Investment properties may soon become the next hot segment of the real estate market throughout the U.S. With falling prices, the rental income in many areas is covering mortgage payments plus expenses and the investments now make sense financially. In addition, there has been little to no new construction of multifamily housing for the last 6-7 years, resulting in a demand for multifamily properties.
Effective March 1, 2009, Fannie Mae rules change since Fannie Mae has now decided that investors once again are an important segment of the housing industry. Fannie Mae had limited investors to only 5 loans for 1-4 units. Now, however, the rule has changed and investors will be able to have 10 loans.
There are some new conditions, however. Click here for the new rules.
I recently wrote a post about the large inventory of multifamily properties here in Portland for sale. There will be more investment-type posts with stats and information coming soon.
According to a recent Harvard Study, rentals will be a very important segment of the housing industry in the years to come. There will be demographic shifts taking place in the future that will favor purchasing multifamily properties for the following reasons:
- The second fastest growing family type over the next 10 to 20 years will be single persons living alone, nearly half (45 percent) of whom will rent
- The native-born population aged 0-19 in 2000 is the largest ever and will be aged 20-39 by 2020
- As this population, born 1980-2000, is augmented by young adult immigrants arriving in this country over the next 10-15 years, the young adult population—the group most prone to rent multifamily apartments—is poised to set a record
- Also,the fastest growth in the population after 2010 will be among those over 65. While home ownership rates peak at about these ages, they begin to ebb as seniors with disabilities and widows shift increasingly towards rentals
- In addition, over and above demographic trends, to the extent that tighter mortgage standards persist into the future, young renters will be unable to make the transition to home ownership
- Those that defaulted on mortgages will have a hard time returning back to home ownership
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
There’s always a lot of focus on residential stats throughout the Portland real estate market by the media and bloggers but there’s been little emphasis, if any, on the stats for multi-family investment properties. In fact, RMLS™ doesn’t break down the statistics whatsoever only giving basic information.
The other day I received a call from a client to whom I had sold a duplex in Beaverton several years ago. In preparing a market analysis I was surprised by the large number of multi-unit properties for sale. At the end of 2008, I had been showing duplexes in Beaverton to another client and there was little to choose from. What a difference a few months make. It appears that the multi-family investment real estate market is following the residential market as well with an over abundance of inventory. Here’s an interesting post from HousingWire.com.
However, here are the stats for the multi-family investment properties for 2008:
- RMLS #143-SE Portland seemed to be the most active area for multi-family investment properties in 2008. Currently, there are 151 active investment properties for sale in SE Portland, but only 6 are pending. In 2008, 112 properties sold with the highest price being $4,400,000, the lowest price was $148,000 and the average sale price was $507,900. Investment properties in SE Portland sold at 92.84% of the original list price and sold after 96 days on the market.
- So what was purchased for $4,400,000? It was a 51-unit complex with 10 garages and had a 6.7% cap rate. The property was on SE Foster Road, Portland.
- The lowest sale was in Woodstock for a 4-unit complex that was in foreclosure and sold for $148,000
Below are the stats for the rest of the RMLS™ areas. It also seems that multi-family investment properties are following residential in that the closer in areas such as SE as mentioned, Northeast and Gresham/Troutdale experienced the greatest number of sales in 2008. I had written a post about the best places to purchase real estate are along a bus-line or light rail and the same holds true for apartments.
In addition, here’s a post from FT.com indicating that lenders are becoming more and more reluctant to loan to potential landlords. Here’s a post from the Calculated Risk blog indicating that the apartment market is declining.
I haven’t focused much attention in my blog posts on investment properties not for any particular reason but will do so in future posts. If in fact there is an interest, I would like to hear from you.
| Multi-Family InvestmentProperties Sold in 2008 | # of Closed Sales | Average Sale Price |
| North Portland | 27 | $445,200 |
| Northeast Portland | 50 | $456,600 |
| Southeast Portland | 112 | $507,900 |
| Gresham/Troutdale | 41 | $559,400 |
| Milwaukie/Clackamas | 16 | $479,000 |
| Oregon City/Canby | 16 | $265,100 |
| Lake Oswego/West Linn | 7 | $502,200 |
| West Portland | 19 | $753,100 |
| Northwest Washington County | 6 | $422,400 |
| Beaverton/Aloha | 21 | $450,900 |
| Tigard/Wilsonville | 15 | $329,000 |
| Hillsboro/Forest Grove | 30 | $364,200 |
| Mt. Hood/Govt. Camp/Wemme | 0 | N/A |
| Columbia County | 8 | $222,400 |
| Yamhill County | 21 | $331,600 |
| Marion/Polk Counties | 22 | $520,400 |
| North Coastal Counties | 12 | $539,700 |
| Source: RMLS™ |
© Copyright 2008-2009 Betty Jung. All Rights Reserved. Use of this article, photos and images without permission is a violation of federal copyright laws.
ALL ABOUT…..Portland.Oregon.Real Estate by Betty Jung is licensed under a Creative Commons Attribution 3.0 United States License.
Based on a Blog at WordPress.
(For more local and national real estate information, go to www.bettyjung.com).
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