Portland Metro Area Home Market Report For June 2014 http://www.movingtoportland.net Voice 503.497.2984 [email protected]

In This Issue

 Portland Home Market: June 2014  Cost of Residential Homes by Community: June 2014  Mortgages  Weather Summary for Portland Metro Area  Portland Property Taxes: Who Gets the Money  : The Battered Bastards of

Portland Home Market for June 2014

June 2014 Highlights: Strongest June Closings since 2007

Closed sales enjoyed a solid month this June in the Portland metro area. The 2,617 closings showed a 4.2% increase over the 2,511 closings from last June. In fact, this was the strongest June for closed sales in the region since 2007 when there were 2,731! Pending sales, at 2,965, rose 5.7% compared to last June’s 2,804, but fell slightly (-0.8%) compared to the 2,989 offers accepted just last month. New listings (4,078) were 8.7% stronger than June 2013 (3,751) but fell 2.7% from May’s 4,192. There are currently 7,250 active residential listings in the Portland metro area. Total market time fell again in June to 59 days. Inventory remained stable for the third consecutive month, and sits at 2.8 months.

Page 2 Portland Metro Area Home Prices for June 2014

Average and Median Sales Price: Median Price Up 8.7% During First Half of Year The average price the first half of the year was $328,900, up 8.7% from the same time frame in 2013 when the average was $302,700. In the same comparison, the median also rose 8.7% from $257,500 in the first half of 2013 to $280,000 in the same period of 2014.

Year-to-Date Summary Portland numbers are very similar this year compared to last. New listings (20,248) are up 4.4% compared to the first half of 2013. Pending sales (14,705) and closed sales (12,518) are down 0.9% and 0.1% in the same comparison.

Sales Price Percent Changes for Portland Metro Area The Average Sale Price Percent Change is based on a comparison of the rolling average sale price for the last 12 months (7/1/2013 - 6/30/2014) with 12 months before (7/1/2012 - 6/30/2013).

 Average Sale Price Percent Change: 10.2% ($322,600 v. $292,800)  Median Sale Price Percent Change: 11.3% ($276,000 v. $248,000)

Sales Price Change in June 2014 From Peak in 2007 Here are the sales price percent changes in June 2014 from their peak prices in 2007:

 Average Sale Price Percent Change from peak in August 2007: -9% ($334,800 v. $366,900).  Median Sale Price Percent Change from peak in July 2007: -4% ($290,000 v. $302,000).

Average and Median Sale Price Chart for June 2005 - June 2014 Below is the Average and Median Sale Price chart for the periods 2005 - 2014 showing the home sales by six-month intervals. The chart is for the five county Portland metro areas. It does not include homes in southwestern Washington (Vancouver to include Clark County).

Home sales in the Portland area reached their lowest price since 2005 in December 2011 and have since begin the slow climb back to the summer of 2007 prices but they still a few percentage points from a full rebound. If the chart above covered a long period of time, say beginning in June 2003, you would find the Page 3 Portland Metro Area Home Prices for June 2014 same curve, rising over the four years and peaking in 2007. Then there was a drop for almost four years until it started to climb in 2012.

Above data based on information from the RMLS™ Market Action report for June 2014.

Another Bubble?

It’s not uncommon for many Realtors in the Portland area to have multiple offers on a listing over the last few months, just like 2007. Rising prices along with a shortage of homes for sale brings up the question. Are we in for another bubble in the housing market? Unlike the stock market, where most people understand and accept the risk that stock prices might fall, most people who buy a house don't ever think that the value of their home might decrease.

Traditionally, the housing market has not been as subject to pricing bubbles as other asset markets have been because the large transaction costs of purchasing a home and the carrying costs of owning and maintaining a home discourage speculative behavior. However, housing markets do go through periods of "irrational exuberance" (a term used by former Fed Chairman Greenspan). What causes housing price bubbles? What are the triggers that cause housing bubbles to burst? Home buyers should look to long-term averages when making critical housing decisions. The main reason for buying a home to live in should not be to gain an immediate financial gain. A home should be something to enjoy and add comfort to your life.

Mean Reversion The laws of finance say that markets that go through periods of rapid price appreciation or depreciation will, in time, revert to a price point that puts them in line with where their long-term average rates of appreciation indicate they should be. This is known as mean reversion. Prices in the housing market follow this law of mean reversion too - after periods of rapid price appreciation (or depreciation), they revert to where their long-term average rates of appreciation indicate they should be. Home price mean reversion can be rapid or gradual. Home prices might fall (or rise) quickly to a point that puts them back in line with the long-term average, or they might stay constant until the long-term average catches up with them. The price of housing, like the price of any good or service in a free market, is driven by supply and demand. When demand increases and/or supply decreases, prices go up. In the absence of a natural disaster that might decrease the supply of housing, prices rise because demand trends outpace current supply trends. Just as important is that the supply of housing is slow to react to increases in demand because it takes a long time to build a house and, in highly developed areas there simply isn't any more land to build on. So, if there is a sudden or prolonged increase in demand, prices are sure to rise. Once you've established that an above-average rise in housing prices is primarily driven by an increase in demand, what are the causes of that increase in demand. There are several: 1. An upturn in general economic activity and prosperity that puts more disposable income in consumers' pockets and encourages home ownership. 2. An increase in the population or the demographic segment of the population entering the housing market. 3. A low general level of interest rates, particularly short-term interest rates, that makes homes more affordable. 4. Innovative mortgage products with low initial monthly payments that make homes more affordable. 5. Easy access to credit (a lowering of underwriting standards) that brings more buyers to market. Page 4 Portland Metro Area Home Prices for June 2014

6. High-yielding structured mortgage bonds, as demanded by investors, that make more mortgage credit available to borrowers. 7. A potential mispricing of risk by mortgage lenders and mortgage bond investors that expands the availability of credit to borrowers. 8. The short-term relationship between a mortgage broker and a borrower under which borrowers are sometime encouraged to take excessive risks. 9. A lack of financial literacy and excessive risk-taking by mortgage borrowers. 10. Speculative and risky behavior by home buyers and property investors fueled by unrealistic and unsustainable home price appreciation estimates. All of these variables can combine to cause a housing market bubble. They tend to feed off each other. Like all bubbles, an uptick in activity and prices precedes excessive risk-taking and speculative behavior by all market participants: buyers, borrowers, lenders, builders and investors.

The Forces that Cause the Bubble to Burst The bubble bursts when excessive risk-taking becomes pervasive throughout the housing system. This happens while the supply of housing is still increasing. In other words, demand decreases while supply increases, resulting in a fall in prices. This pervasiveness of risk throughout the system is triggered by losses suffered by homeowners, mortgage lenders, mortgage investors and property investors. Those losses could be triggered by a number of things, including: 1. An increase in interest rates that puts homeownership out of reach for some buyers and, in some instances, makes the home a person currently owns unaffordable, leading to default and foreclosure, which eventually adds to supply. 2. A downturn in general economic activity that leads to less disposable income, job loss and/or fewer available jobs, which decreases the demand for housing. 3. Demand is exhausted, bringing supply and demand into equilibrium and slowing the rapid pace of home price appreciation that some homeowners, particularly speculators, count on to make their purchases affordable or profitable. When rapid price appreciation stagnates, those who count on it to afford their homes long term might lose their homes, bringing more supply to the market. The bottom line is that when losses mount, credit standards are tightened, easy mortgage borrowing is no longer available, demand decreases, supply increases, speculators leave the market and prices fall.

Making Price Appreciation Estimates When Buying a Home Too many home buyers use recent price performance as a benchmark for what they expect over the next several years. Based on their unrealistic estimates, they take excessive risks. This excessive risk-taking is usually associated with the choice of a mortgage and the size or cost of the home the consumer purchases. There are several mortgage products that are heavily marketed to consumers and that are designed to be relatively short-term loans. Borrowers choose these mortgages based on the expectation that they will refinance out of that mortgage within a certain number of years and will be able to do so because of the equity they will have in their homes at that point. Recent home price performance is generally not a good prediction of future home price performance. Home buyers should look to long-term rates of home price appreciation and consider the financial principle of mean reversion when making important financing decisions.

Source: “Why Housing Markets Bubbles Pop,” by Gary Nielsen from the Investopedia Website.

Page 5 Portland Metro Area Home Prices for June 2014

Cost of Residential1 Homes by Area/Community for June 2014

Year-to-Date June Average June For Period Ending 2014 Sales 2014 June 30, 2014 Average Price Closed Area Sales Percent Sales 2 Price Average Median Change Sales Sale Price Price Portland Metro Area3 Includes these counties in Oregon: Clackamas, Columbia, Multnomah, 2,617 $334,800 $328,900 $280,000 10.2% Washington, & Yamhill

Portland

North 132 $293,900 $284,800 $267,300 13.4%

Northeast 246 357,100 350.300 304,200 11.5%

Southeast 298 306,300 297,300 252,500 14.6% West (Includes SW and NW Portland and parts 299 467,900 466,300 385,000 6.1% of eastern Washington County)

Portland Metro Suburban Areas

Corbett, Gresham, Sandy, Troutdale 169 $249,700 $237,400 227,000 12.6%

Clackamas, Milwaukie, Gladstone, Sunnyside 198 309,200 301,700 283,700 12.5% Canby, Beavercreek, Molalla, Mulino, Oregon 138 296,100 294,000 279,000 13.8% City Lake Oswego and West Linn 156 527,300 525,900 459,000 8.7% Northwest Washington County & Sauvie 122 415,800 413.800 385,000 9.4% Island Beaverton and Aloha 260 275,000 272,900 250,000 12.8%

Tigard, Tualatin, Sherwood, Wilsonville 232 331,100 328,800 311,000 6.4%

Hillsboro and Forest Grove 155 277,200 261,200 240,000 10.9% Mt. Hood: Brightwood, Government Camp, 20 241,200 253,300 232,600 20.3% Rhododendron, Welches, Wemme, ZigZag

Counties

Columbia County 71 $202,700 $201,800 $193,800 22.1%

Yamhill County 121 251,400 254,200 221,700 11.2%

Southwest Washington State

Clark County (Battleground, Camas, 637 $272,700 $264,300 $235,000 9.3% Ridgefield, Vancouver, Woodland, etc.)

1 Residential includes detached single-family homes, condos, townhomes, manufactured homes, and multi-family (e.g., duplexes, triplexes, etc.) homes when one of the units is sold. 2 The average sales price percent changes are based on a comparison of the rolling average price for the last 12 months (7/1/2013-6/30/2014) with 12 months before (7/1/2012-6/30/2013). 3 Based on information from the RMLS™ Market Action report for June 2014.

Page 6 Portland Metro Area Home Prices for June 2014

Mortgages

Primary Mortgage Market Survey: 30-Year Fixed Mortgage Rate 4.15%

Freddie Mac released its Primary Mortgage Market Survey® (PMMS®) on July 10 showing average fixed mortgage rates following little changed after initially easing slightly higher from the previous week which was largely fueled by a better than expected jobs report showing labor markets improving. News Facts  30-year fixed-rate mortgage (FRM) averaged 4.15 percent with an average 0.7 point for the week ending July 10, 2014, up from last week when it averaged 4.12 percent. A year ago at this time, the 30-year FRM averaged 4.51 percent.  15-year FRM this week averaged 3.24 percent with an average 0.6 point, up from last week when it averaged 3.22 percent. A year ago at this time, the 15-year FRM averaged 3.53 percent.  5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.99 percent this week with an average 0.4 point, up from last week when it averaged 2.98 percent. A year ago, the 5-year ARM averaged 3.26 percent.  1-year Treasury-indexed ARM averaged 2.40 percent this week with an average 0.4 point, up from last week when it averaged 2.38 percent. At this time last year, the 1-year ARM averaged 2.66 percent. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac: “Mortgage rates increased for the week as the labor market appears to be improving. Based on the employment report [PDF], released last week, the U.S. economy added 288,000 jobs in June, gained 224,000 in May and increased by 304,000 in April. Also, the unemployment rate in June fell to 6.1 percent from 6.3 percent in May." To view the “Regional Breakdown” click here.

Portland Area Mortgage Rates

To check on Portland metro area mortgage rates visit Professor Guttenberg’s website at mtgprofessor.com – click on “Fixed-Markup Lender.” Jack M. Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Taking the median home price in the Portland area of $290,000 for June 2014 and with 20 percent down payment ($58,000) and a mortgage of $232,000, the payment for a 30-year fixed loan is $1,124.39 per month (excluding property taxes and insurance) in Portland, Oregon. The interest rate is 4.125%, and the APR is 4.156%. Total closing costs are $5,089.08. Guaranteed lender fees are $2,712.08 − the lender fees are guaranteed not to change from the time they lock your rate (30 days) to closing. Closing attorney/agent, appraiser, title insurance, and credit reporting costs are $2,160.00. The markup fees are $5,865.04. Local government taxes and fees are $217. Escrow fees are not waived. FICO credit score is good (720-739). According to the professor: “In using an on-line lender monitored by the mortgage professor, a borrower enjoys competitive wholesale prices, which are disclosed and passed through by the on- line lender and a standardized and reasonable markup over the wholesale price, which is guaranteed by the professor. This eliminates all potential sources of abuse."

Page 7 Portland Metro Area Home Prices for June 2014

Weather

Portland's summer dry season kicked-off back on June 30th, after seeing more than 1.25 inches of rain over a 10 day stretch. Natives in the area have long said that summer begins July 5th and the record book backs up the folklore. Historically, Portland's driest weather of the year runs from July 11th - August 18th. The roughly five week period averages less than a 20 percent rain chance each day and can pass without a single drop of rain. The weather forecasters predicted temperatures in the 90s for the coming week. The normal is 12 days of temperatures over 90 degrees in the Portland metro area. Here is a plau-by-play of the weather on Sunday, July 13:  The morning sky was dark, and we heard some thunder and expected a heavy rain. We had a light rain in the morning for a couple hours and the sky remained dark until late afternoon.  Things will be a little cooler today as we're stuck at 68 and 81 percent humidity. Maybe some thunderstorms.  At 3 pm scattered rain persists as temperatures hold steady at 68 degrees. The forecasted high has dropped from 90 to 81, but even that seems unlikely, as temps have already started to drop. Humidity is down to a slightly less sticky 75 percent. Below is the National Weather Service precipitation data for the month of June 2014. These readings are from the Portland airport.

 Average Monthly Temperature for June 2014: 63.7 (0.1 degrees above normal of 63.6).  Warmest Day: 85 degrees on June 30.  Coldest Day: 48 degrees on June 10.  Most Rainfall in 24 Hours: .75 inches on June 25-26.  Rain Days: 0 days with thunderstorms, 2 days with heavy rain, 14 days with light rain.  We had 8 days of fog with visibility equal to or less than .25 miles.  Clear/Cloudy Days for June 2014: 4 fair days, 17 partly cloudy days, and 9 cloudy days.  Average Wind Speed for June 2014: 6.3 mph

Below is the precipitation data for the water year (October 1 – September 30)

Water Year Average Precipitation Actual Precipitation Water Year (October 1 - In Inches in Inches September 30) Year-to-Date 33.24 29.01

October 3.00 1.15 Portland’s rainfall is measured by November 5.63 3.05 the “water year” which is from December 5.49 1.62 October 1 through the end of January 4.88 2.70 September. February 3.66 5.12 March 3.68 7.52 April 2.73 3.03 May 2.47 2.39 June 1.70 2.33 Precipitation is measured from the July 0.64 NOAA Weather Station near the Portland August 0.67 International Airport. September 1.47 Yearly Average 36.27

Page 8 Portland Metro Area Home Prices for June 2014

Portland Property Taxes: Where the Money Goes

The July 9, 2014 issue of The Portland Mercury has an excellent article written by Denis C. Theriault entitled “Where the Money Goes.” Staffers at the Portland City Budget Office mocked up a hypothetical property tax bill at The Mercury request—for a median-priced home assessed at $152,890—and figured out how the resulting $3,689.75 tax payment would trickle its way through government. "It's valuable for people to know that at all levels, what government spends money on, for the most part, is the same old regular meat-and-potatoes stuff," says Commissioner Novick, who oversees Portland Bureau of Transportation. "In pretty much every city, the biggest items are police and fire. And it's probably been true since the days of William the Conqueror, if not before." The print edition of the article has graphs and charts that make it easy to read and understand, and the website also has some graphics that help understand the money flow. We took some excerpts out of the online article, and they are below along with a link to the article. The city reaps millions every year in property taxes, business taxes, and utility franchise fees. So how about the rest of that revenue? Where do your property taxes actually go? The Mercury decided to take a look. The majority of your tax bill, it turns out, doesn't even make it to city hall. Schools, Multnomah County, and Metro all get a taste. And then, when the city does get its share, a little more than $1,500, more than half is spent largely outside city hall's control—on pieces like urban renewal projects and public safety pensions (which float up and down to keep pace with costs every year). And as for the $631.24 from your bill that city hall does get to decide to how to spend? More than half of it, $374.81, goes to the fire and police bureaus. And the next biggest chunk, $71.10, goes to parks. Everything else, from transportation to housing to planning to debt service to reserve funds, to pay raises, to city administration, must fight over the $185.33 that's left. The Portland Bureau of Transportation (PBOT), which gets much of its discretionary money from stagnant gas-tax receipts, gets just $14.66. Here's what that means: There's plenty of money in the budget to pave our streets—that is, if you're willing to execute a few sacred cows. Want to find $50 million without raising new money? Then get ready to lay off hundreds of cops, let some park grass grow wild, and close some fire stations. Or give up on urban renewal projects. Or fire political staffers and gut every other program and bureau that makes up a decent, thriving city.

Property Tax Doubled Saince the 1999-2000 Fiscal Year According to the most recent stats from the Bureau of Economic Analysis, real total personal income in Multnomah County rose 24 percent from 1999 to 2012. The city's property tax haul, meanwhile, has doubled since the 1999-2000 fiscal year, up to $450 million from $225 million. (Adjusted for inflation, it's actually gone up only about 40 percent.) But the share of property tax revenues that the city most directly spends—the cash that goes into the city's general fund—has actually gone down since that time period. A much larger share of tax bills has been going to urban renewal.

Click here to read more…

Source: “Where the Money Goes,” by Denis C. Theriault, writer for The Portland Mercury weekly newspaper. Published July 9, 2014. Page 9 Portland Metro Area Home Prices for June 2014

Portland Mavericks: The Battered Bastards of Baseball

The Battered Bastards of Baseball, a new documentary that debuted on Netflix on Friday, July 11, recaps the incredible story of the minor league Portland Mavericks. On Saturday night, along with takeout pizza, we streamed the movie and enjoyed the show to the nth degree. We’re one of the few Portlanders who loves baseball and after attending a professional soccer game decided that we didn’t understand the game or the how they kept time. Founded in 1973 by baseball-mad actor , the Mavericks played in the Class A despite no affiliation with a Major League franchise. Russell kept a 30-man roster because he believed some players deserved to have one last season. Playing against highly touted prospects, Russell’s group of has-beens and misfits produced winning records in all five of their seasons before the Class AAA expanded back into Portland, paying Russell a record $206,000 for the territorial rights after he sued them. They won their division twice and made the playoffs three times during their five years of existence. Behind the on-field shenanigans and eccentric personalities, there's a meatier story about the corporatization of sports and the disappearance of the barnstorming attitude Bing Russell took as a virtual religion. Through original game footage and contemporary interviews with key figures in Mavericks history, filmmakers Chapman and Maclain Way — two of Russell’s grandsons — expose the team’s countless quirks and the secrets to its unlikely success. The brothers did a commendable job of unearthing vintage Mavericks movies, including some 16mm footage shot by Portland filmmaker Don Gronquist. "Battered Bastards" does a good job of capturing the feel of a feverish Civic Stadium in the 1970s. Here’s some tidbits of information from the movie:

 Mavericks pitcher Rob Nelson conceived a bubblegum alternative to chewing tobacco while in the bullpen, and one of his teammates — former Yankee — brought it to Wrigley.  Larry Colton played several seasons of Class AAA ball and made one Major League appearance — a two-inning relief stint with the Phillies in 1968. He joined the Mavericks after he had already become an English teacher. He has since written multiple books, including Counting Coup — a chronicle of a high-school girls’ basketball season that earned a Pulitzer Prize nomination in 2000.  Former Mavericks batboy , who provides some of the documentary’s funniest and most insightful quotes, grew up to become an actor, director and screenwriter. His In the Bedroom earned five Oscar nominations in 2001.  In the film, Jim Swanson claims to be the first left-handed catcher to sign a professional contract, which isn’t technically true. Lefty catchers are exceptionally rare at every level above Little League. No lefty-throwing player has seen time behind the plate in the Majors since Benny Distefano played six innings at catcher for the 1989 Pirates. ______Susan Marthens Principal Real Estate Broker, CRS, GRI Windermere Stellar 6443 SW Beaverton-Hillsdale Hwy, Suite 100, Portland, Oregon 97221 Telephone: 503.497.2984 Email: [email protected]