Foreclosure Valley to hold citywide open house

From the Oregonian:

City leaders, business owners and residents here have all heard the chortling about how high foreclosure rates and half-finished subdivisions make their community east of Interstate 205 far closer to Death Valley than Happy Valley.

Now, by staging what's billed as the nation's first citywide open house, Happy Valley is setting out to turn that frown upside-down.

A daylong event Saturday will open the doors of 150 houses in this city of 11,600 residents to everyone from prospective buyers to the merely curious.

But home tours are just the start. Anyone wondering about living in Happy Valley will be able to chat with school employees, talk shop with police and fire officials and get a first-hand look at a city park so new it hasn't even been named.

"We want to show that a community is much more than just a collection of houses," Steve Campbell, Happy Valley's community services director, said. "And that this city, in particular, really believes in itself."

No one denies, however, that Happy Valley's housing crash has been as bad or worse than just about anyplace else in the state.

Until last year, surging growth and a home-building boom made this the fastest-growing city in Oregon. At the peak of the boom, the city issued 500 to 600 building permits annually.

That has ground to a near-halt.

Nearly 200 Happy Valley houses are now in various stages of foreclosure, Campbell said. Another 100 houses are back in the hands of the banks that financed them. And from 80 to 100 vacant lots, which will be available for viewing Saturday, are for sale.

"The bigger you are, the harder you fall," he said. "When the crash happened, we were left holding the bag."

Kathy Daw, Happy Valley's city manager, came to work one morning recently and announced to Campbell and others that something needed to be done. In short order, city staffers were calling area real estate agents, mortgage brokers and bankers, floating the idea of a citywide open house to put a positive spin on an otherwise bleak situation.

They decided to call their free, self-guided event "City of Dreams."

Industry professionals are applauding the effort.

"It's not unlike how states promote themselves to tourists," said Mikalan Moiso, principal broker in Re/Max Equity Group's Lake Oswego office. "It's brilliant marketing."

The only thing the city of Happy Valley knows is real estate. In the past every budget problem could be cured by building and selling a few more homes. No wonder the only 'logical' and 'brilliant' solution they can think of is to build and sell a few more homes.

Probably not going to work as well as they hoped.

Oregon foreclosure rate highest since early 80's

From the Oregonian:

Oregon's foreclosure rate spiked in the first quarter of 2009 to a level seen only once before in the last 30 years, according to a report released today.

The Mortgage Bankers Association report shows 2.21 percent of Oregon's 636,000 outstanding mortgages were in some stage of foreclosure during the first three months of the year.

That's the highest since the rate hit 2.23 percent in early 1985 during a nasty Oregon recession.

This year, the figures are likely to get worse as home owners who've lost their jobs fall behind on their mortgages.

While Oregon's mortgage woes hit historic levels, the state continues to fare better than the country as a whole.

Nationally, the rate of foreclosures and late mortgage payments to hit record highs again as the trouble spreads from risky subprime loans to more traditional prime loans.

Sun Belt states that saw the most rampant speculation during the housing boom -- California, Florida, Arizona and Nevada -- continue to suffer the worst of the mortgage troubles.

The four states account for about 46 percent of the foreclosure starts nationally.

While Oregon is doing better than California it is worth pointing out that we are now experiencing foreclosures at the same rate that California did 18 months ago. I don't think Oregon's foreclosure rate will end up as bad as California's but given the fact that we trail the nation by about a year I think we are still in for more bad news.

Oregon's housing market decline ranks 10th worst in nation

Some interesting statistics from First American Loan Performance:

The charts are fairly straight forward. The first ranks American metro areas based on the 12 month change in home values. Portland ranks 16th for percent decline.

The next chart shows the same thing but is based on states rather than metro areas. Oregon ranks 10th for percent decline.
Here is a summary of the United States:

Oregon metro area unemployment rates

Unbelievable- Last year Portland's unemployment rate was under 5%.

Portland home values off 21%

The S&P Case-Shiller Index is based on observed changes in home prices. It is designed to measure the increases or decreases in the market value of residential real estate.

For each home sale transaction, a search is conducted to find information regarding any previous sale for the same house. If an earlier transaction is found, the two transactions are paired and are considered a “repeat sale.” Sales pairs are designed to yield the price change for the same house, while holding the quality and size of each house constant.Sales pairs from the following counties are included in the Portland index: Clackamas, Columbia, Multnomah, Washington, Yamhill, Clark (WA), and Skamania (WA).

The first graph shows all historical data for Portland, Seattle, and the 10 city index. The Portland residential real estate market has fallen 15.3% in the last year.

The second graph highlights the changes since the Federal Reserve stopped lowering interest rates in June of 2003. The Portland index is currently at 147.68; a decline of 20.8% since the market peak. The last time the index was this low was May of 2005.

The final graph shows the year over year percent change since June of 2003.

It looks like the national housing market reached the point of inflection, where things go from declining at an increasing rate to declining at a declining rate. Only a few more years...then we can all buy homes.

Portland on the other hand is still getting worse at a worse rate. We should reach the midway point before the year is over.

Entry level positions in Bend draw over 200 resumes

From the Bend Bulletin:

After working at AT&T for 25 years, Don Mercer decided he was done punching the time clock.

In 1998, he retired early, moved to the Bend area and focused his energy on volunteering, including with the Deschutes County Sheriff’s Office Search and Rescue.

But when the stock market plummeted, the investments Mercer and many others counted on for retirement income went with it.

“Like a whole bunch of people recently, the decline in investments in the stock market gave me the opportunity to go back and seek work,” said Mercer, now 59.

He saw a job opening at the Deschutes County jail last fall, researched it and applied. Mercer was one of 273 to apply.

A landfill attendant job opening this spring brought in 381 applications, while a job opening for a building maintenance specialist at the jail resulted in 177 applications. More people apply for these entry-level positions than for specialized jobs that require specific education and experience, county staff said, but the numbers from the past seven months are higher than normal. By comparison, a building maintenance specialist opening in June 2007 had 62 applicants, and a landfill attendant job in August 2007 brought in 123 applications, said Tracy Scott, a human resources analyst and office supervisor for the county.

Those who apply for jobs for which they are overqualified, might want to take a different approach. “We talk to our job seekers ... about how to arrange their résumé,” said Janet Ainardi a business and employment specialist at WorkSource in Bend. “Sometimes (they make) changes so they don’t look as qualified, which is really different from what you’re normally taught about résumés.”

Oregonian: 'It doesn't look as if things will get better soon'

From the Oregonian:

The spring buying season has started, and the numbers - surprise - don't reveal many sunny story lines.

Yes, the falling prices can mean bargains for investors fat with cash. And first-time homebuyers have begun poking around, enticed by low interest rates and an $8,000 federal tax credit.

The Portland-area median home price in April was $249,900, down 17 percent from the bubble-era peak. The number of closed sales through April was down 30 percent from a year ago. Anyone who bought after January 2006 has seen his home lose value.

The trouble is most acute among downtown condo towers and luxury homes. Sales of homes above $1 million are off nearly two-thirds from last year.

It doesn't look as if things will get better soon.

The housing collapse sparked by bad mortgages has run through Sun Belt and Rust Belt states for years now. But Oregon homeowners are seeing the worst of the housing trouble hit just as the recession strikes.

Oregon's unemployment rate -- No. 2 in the nation for March -- means more trouble for people struggling to cover their mortgages.

Foreclosures continue to rise, and more sellers are losing money on what are known as short sales. Those sales happen when an owner owes more then the house is worth.

Buyers always want to know whether home prices have hit bottom. But the answer is never clear until the bottom has passed.

Here's what a couple of experts say:

Economics firm IHS Global Insight ranked Portland as the ninth-most overvalued housing market in late 2008. Bend was fifth, Eugene 10th, Salem 12th and Medford 20th.

Jerry Johnson, a Portland housing consultant to homebuilders and cities, predicts median prices will hover around $250,000 through 2009.

The article includes a story about a first time home buyer looking at short sales in the Pearl District. Good information for those of us looking in a few years.

Vancouver unemployment at 13.4%

From the Oregonian:

The unemployment rate in Clark County and Washington did not change from March to April, the state Employment Security Department announced today.

Clark County's 13.4 percent jobless rate in April, unadjusted for seasonal factors, was more than double last April's 5.8 percent. And Washington's seasonally adjusted 9.1 percent for the month was well above the 4.9 percent for April 2008.

March's figure in Clark County was revised upward from last month's jobless announcement because unemployment figures are often calculated before receipt of data on residents who file claims in Oregon.

Portland RMLS Market Action Report – April 2009

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for April 2009 was $249,900; this is a 9.1% decrease from the median sale price for April 2008.

The Portland residential real estate market peaked in August 2007 with a median sale price of $302,000. Prices have now fallen 17.3% from that peak.

Months of supply (total inventory/monthly sales) sits at 11.0 months compared to the 10.3 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 14,322 homes for sale; this is a decrease of 12.1% from the same month the year before.

The third chart shows closed sales by month. There were 1,302 closed sales during the month; a decrease of 17.7% from the same month the year before.

The fourth chart shows new listings by month. There were 3,808 new listings during the month; a decrease of 28.0% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 18.9% from the current median for the ratio to reach 3.0.

Oregon unemployment remains at 12%

From the Oregon Employment Department:

Oregon’s seasonally adjusted unemployment rate was essentially unchanged at 12.0 percent in April compared with 11.9 percent (as revised) in March. The state’s unemployment rate remains well above its year-ago level of 5.6 percent in April 2008. The U.S. seasonally adjusted unemployment rate rose to 8.9 percent in April, from 8.5 percent in March.

In April, Oregon’s seasonally adjusted nonfarm payroll employment declined by 9,500 jobs, following a drop of 9,700 (as revised) in March. Each of these two months experienced large job losses, but the losses were not as substantial as some of the monthly job losses in the prior five months when 22,800 were lost in February, 13,000 were cut in January, and 12,600 were cut in October.

In April, 242,550 Oregonians were unemployed. In April 2008, 101,964 Oregonians were unemployed. Thus, the number of unemployed more than doubled over the past 12 months.

Nike cuts 500 from Beaverton headquarters

From the Portland Business Journal:

Nike said it is laying off 500 workers at its Washington County headquarters as part of a worldwide restructuring that includes about 1,750 job cuts.

The global sportswear giant had announced in February that it would undergo a corporate-wide restructuring that included a review of the company’s entire supply chain “from the sourcing base to the retail footprint.”

The job cuts represent about 5 percent of Nike’s 35,000 workers worldwide — slightly steeper than the 4 percent workforce reduction the company in February said would likely result from the restructuring.

Oregon's budget short $3.6 billion in 2009-11

From the Oregonian:

Oregon will be short roughly $3.6 billion for schools, social services and other public needs in 2009-11, according to the latest state revenue forecast numbers released this morning.

That hole, which means the state will have about 20 percent less money than it needs to keep state services at current levels, is less dire than lawmakers had anticipated.

Gov. K gets one right

From the Oregonian:

Citing a "jobs emergency," Gov. Ted Kulongoski took a page from the Great Depression on Friday, proposing a hurry-up plan to put 12,000 Oregonians to work at low-wage jobs in food banks, on forest trails and in state campgrounds.

The jobs would be temporary and would pay minimum wage or a bit more. But they would help turn the economy around and give at least some of the growing ranks of jobless the sense of dignity that comes with a paycheck, Kulongoski said in a speech to the City Club of Portland.

"President Roosevelt gave hope to millions of unemployed Americans when he created the Civilian Conservation Corps and other jobs programs," Kulongoski said, harking back to an era of bread lines and soup kitchens. "We need to take the same kind of immediate action in Oregon."

Kulongoski said he will ask the Legislature to approve spending $90 million from the state unemployment insurance fund to pay for the jobs program, which would be overseen by the state's community colleges and Workforce Development agency.

Money is taken from the unemployment fund and given to the unemployed in exchange for work. Basically the state is trying to get some service and maintanance upkeep performed in exchange for the unemployment check.

This is a really good idea. The lower skilled portion of the labor force is in terrible shape and most of them will not find jobs in the private sector right now. Instead of just allowing them to watch Jerry Springer all day and collect unemployment checks while 'searching' for work the state will get something productive in exchange for the weekly remittance.

It isn't very often I agree with our Governor but I think this one is a great idea. The fact that he is offering minimum wage is a clear sign that he is trying to get maximum value out of this plan.

Bend homes half off

From the Bend Bulletin:

The median price for a single-family home in Bend fell to $195,000 in April, but sales surged, according to the monthly Bratton Report released Tuesday. The median was last below $200,000 in early 2004, according to The Bulletin’s archives. The median price fell 27.8 percent from the April 2008 price of $270,000 and 50.8 percent from its peak of $396,000 in May 2007. Bend home sales, though, rose nearly 18 percent — from 89 in March to 105 in April. Sales rose 12.9 percent from April 2008.

Two years later homes are half off. The market is still in terrible shape so I wonder how much it will 'over correct'.

Oregon Foreclosures up in April

RealtyTrac released their April 2009 foreclosure data last week and Oregon ranks 12th in the nation for per household foreclosures.

There were 124 notice of defaults last month, down 89% from the same month the year before. The bank files a notice of default when a mortgage payment is late and attempts to reconcile the issue out of court have failed.

If the homeowner doesn’t pay the default balance within 90 days then the bank records a notice of trustee sale with the county and schedules a trustee's sale. There were 3,109 notices of trustee sales last month, up 656% from the same month the year before.

Total Foreclosures are up 136% from the same month the year before.

The best way to compare state foreclosure rates is with a penetration or per household rate. Here is a comparison of the regions states. A larger number indicates fewer foreclosures. Oregon is experiencing one foreclosure for every 419 households.

Here is a heat map from RealtyTrac.

Charles Turner pulls 2356 Hoyt off the market

Last week I posted an article regarding the 55 months of supply for million dollar homes in Portland. I jokingly asked how this enormous glut would impact Charles Turner's flip attempt at 2356 NW Hoyt St.

Just one week later we get his answer- He pulled it off the market.



Records show Charles purchased the 'fixer upper' in May of 2008 for $535,150.00 under SAPPHIRE DEVELOPMENT LLC.

We do not know how much Charles has invested into the property but we do know he is personally liable if the LLC defaults.

The Original asking price in October 2008 was $1,195,000.

In January of this year he dropped the asking price $45,000 to $1,150,000.
In February of this year he dropped the asking price $25,000 to $1,125,000.
In March of this year he dropped the asking price $25,000 to $1,100,000.

Total reduction was $95,000 or 8.0%. The home had been on the market for 6 months.

Despite the problems surrounding this property Charles still thinks its a good time to buy. From his blog last month:

I have been advocating for months- no matter what the market, the are opportunities out there for the right buyer- not every buyer.

...

The Blazers have proven they can come back, the housing market can do the same.

The Blazers will come back...in 2010.

UPDATE:

It appears Charles canceled one listing and relisted it for $1,050,000. This is now 12% off the original asking price...

The beat goes on.

More Oregon loans about to reset

From the Register Guard:

The Willamette Valley was a hot spot for subprime mortgages four years ago — much to the enduring misery of valley homeowners, according to an investigation published Wednesday.

Many of the nation’s top 25 subprime lenders were highly active in Lane County until the market meltdown in late 2007.

The firms — most now defunct or sold to avoid bankruptcy — include Washington Mutual, Countrywide Financial Corp., New Century Financial Corp. and First Franklin Corp., according to the analysis by the Center for Public Integrity, an investigative reporting group funded by charitable foundations.

“It means a lot of families are going to go into foreclosure,” Sen. Jeff Merkley said Wednesday. “They may be able to afford the payments quite handily when the payments are at 6 percent (interest) but when the payments (change) to 10 percent, they can’t. There’s just no way they’re going to be able to make those payments.

Merkley, D-Ore., has a long-standing interest in the lending industry. He said he was asked by Senate Banking Committee Chairman Chris Dodd Wednesday to conduct hearings on predatory mortgage practices in the coming months.

The incentives for brokers in those years were all wrong, Merkley said.

Some brokers “immediately present themselves in a way to win your trust,” he said. “They’re going to be your financial advisor and they’re going to help you find the best loan and you believe them.

“But you simply don’t know — and that’s why I consider this a terrible, terrible scam — that they were being paid off-balance-sheet by the lender to steer you into the exactly the opposite — not one that’s good for you, but one that’s terrible for you but very good for the investor.”

Oregonians not only took out a lot of straight, subprime high interest loans. Oregon also ranked near the top for exotic pick-a-payment loans and negative amortization loans in which the amount the borrower owes may actually grow, instead of shrinking, as time passes.

In 2003, less than 2 percent of the home loans made in Oregon matched that description, according to First American CoreLogic. By 2006, the proportion had soared to more than 20 percent.

“The reset date on those loans is coming due now. Over the next 12 to 24 months, the bulk of these loans will have their first major reset,” said Angela Martin, spokesman for the Portland-based political group Our Oregon. “That’s where we’re going to see Oregon — and the Willamette Valley in particular — continue to struggle with very high home foreclosures. It’s a mess.”

U of O Index shows no sign of improvement

Professor Duy released the U of O Index of Economic Indicators for March this week.

The University of Oregon Index of Economic Indicators™ fell 0.6 percentage points in February to 84.9 (1997=100), signaling continued deterioration in the Oregon economy. Some indicators—Oregon initial jobless claims, U.S. consumer confidence, and core capital goods orders—point to a slower rate of decline compared to the sharp drop-off experienced at the end of 2008. Still, overall the UO Index indicates that the Oregon economy remains in recession.

As a general rule of thumb, a decline of 2.5 percent (annualized) over six months, coupled with a decline in more than half of its components, signals that a recession is likely imminent.

On the job market-

Indicators measuring the Oregon labor market were mixed. Initial jobless claims fell during March, reversing the previous month’s increase. Initial claims remain below the peak reached in December 2008, suggesting that the pace of labor market deterioration has slowed. Still, the level of initial claims remains consistent with ongoing declines in nonfarm payrolls.

On housing starts-

Residential housing permits (smoothed) fell to a monthly rate of 836 in March, breaking through the bottom of the roughly 900–1,000 range it has been tracking for the past several months. Clearly, the decline in residential housing continues; lower mortgage rates and lower prices are so far insufficient to offset the trend of tighter underwriting conditions and foreclosures that rise along with Oregon’s unemployment rate.

Randall Edwards puts himself before his job

From the Oregonian:

State officials were slow to catch and even slower to put a stop to risky investments by managers of the Oregon College Savings Plan that resulted in tens of millions of dollars in losses to students and their families, documents obtained by The Oregonian show.

E-mails between the state treasurer's office and OppenheimerFunds provide new details of how officials reacted as $1 billion in college investments plummeted to $744 million in less than a year. Nearly 107,000 people are saving for college for their children, grandchildren and others in the state plan.

But communications obtained under Oregon's public records law show that state officials weren't closely monitoring the fund and didn't take action to stem the bleeding until it was too late. For months, they relied on assurances from OppenheimerFunds that the money was well-managed.

The e-mails and records also show a friendly relationship between OppenheimerFunds and state treasury staff, including buying meals at top Portland restaurants. After the fund's problems were made public in The Oregonian, OppenheimerFunds furnished the state with "talking points," and a state official gave the company a "heads up" about a pending state investigation.

The article is long but it is a great one. Randall Edwards invested in a bond fund with a 1.64% expense ratio while a comparable bond fund with Vanguard charged .10%.

It also includes this lovely kick back for Edwards:

A nonprofit asks OppenheimerFunds to sponsor an event honoring Treasurer Randall Edwards for his "commitment to financial literacy in Oregon." Plan executive director Michael Parker writes there is "certainly no obligation."

Vancouver RMLS Market Action Report – March 2009

The Regional Multiple Listing Service released the Market Action Report and the median sale price for March 2009 was $225,000 this is a 10.0% decrease from the median sale price for March 2008.

The Vancouver residential real estate market peaked in July 2007 with a median sale price of $269,900. Prices have now fallen 16.6% from that peak.

Months of supply (total inventory/monthly sales) sits at 11.7 months compared to the 11.9 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the months closed sales multiplied by the months of supply. There are currently 4,048 homes for sale; this is a decrease of 10.7% from the same month the year before.

The third chart shows closed sales by month. There were 346 closed sales during the month; a decrease of 9.19% from the same month the year before.

The fourth chart shows new listings by month. There were 800 new listings during the month; a decrease of 34.0% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 10.0% from the current median for the ratio to reach 3.0.

It looks like sellers are giving up and not placing their homes on the market.

The Shire is finally sold

From the Portland Business Journal:

A private investment group is in escrow to purchase The Shire, a hobbit-themed housing development in Bend that came to symbolize the real estate excesses of the early 2000s.

Terms of the deal were not available.

The original developer envisioned a community of Old English style homes. Its buildings resembled the world of J.R.R. Tolkien’s "Lord of the Rings," complete with thatched roofs and stone accents.

Construction began in 2006 but the market crashed before sales could take off. The Shire was to boast 15 luxury “cottages," 16 townhomes and a common area including an amphitheater for community productions.

After the market collapsed, the project failed.

Umpqua Bank foreclosed on the partly built community over a $3 million unpaid loan and assigned the sale to Realty Marketing/Northwest, a Portland-based real estate auction service.

Realty Marketing/Northwest featured The Shire on the cover of its spring auction catalogue after the property failed to command its last asking price of about $1.3 million.

Umpqua set the reserve at $750,000 for a property that includes one home dubbed “The Butterfly," six acres, six developable lots, eight townhome sites and a common area.

John Rosenthal, president of Realty Marketing/Northwest, confirmed the sale is pending to an unidentified private buyer.

So 60% off wasn't enough to move The Shire. For more on this development check out my previous post. If you click on 'died July 7' it will give you some background on the developer's death.

Million dollar homes have 55 months of supply

From Agent 503:

Sales on Portland’s million-dollar homes had already slowed markedly in 2008. As of Q1/2009 the pool of buyers has shrunk even further yet. Of the 550 million-dollar-homes that were listed for sale in the first quarter for the Portland metro area, a mere 30 sold, resulting in a record 55-months of inventory and rivaling sunbelt hot-spots such as Phoenix.

The number of million-dollar sales is down 50% from a year ago (Q1/2008) and trails the first quarter of ‘07 by more than 65%. Lake Oswego and the West Hills supply the bulk on the inventory, together these sections accounted for 19 sales over the last three months.

I wonder how the imbalance impacts this project.

The Columbian files chapter 11

From the Oregonian:

The newspaper industry's crash hit the Northwest again Friday when The Columbian Publishing Co. filed Chapter 11 bankruptcy.

Scott Campbell, the Columbian's third-generation publisher and co-owner, said an ill-timed foray into real estate and a 40 percent decline in ad revenue forced the move. Bank of America in April sued the Columbian to recover $15.4 million in unpaid debt and interest.

The Columbian will continue to publish daily, he added, and will emerge from bankruptcy intact and well-positioned. After cutting staff from 350 to 270 and paring other expenses, the company now has a positive cash flow, Campbell said.

At the root of the Columbian's problems was debt that it assumed to get a glossy new office tower built at 415 W. Sixth St. in Vancouver. The Columbian moved its operation to the new building in January 2008, which coincidentally is when its management realized that ad revenues were falling way short of projections.

Shortly thereafter, the Columbian moved its staff back to its old building at 701 W. Eighth St.

I wonder how much real estate ad revenue has dropped.