August 2003 Newsletter
by Susan Marthens
Contributors Gail Mann and Teresa Kirsch

In This Issue

1. Portland Home Market - June 2003 Residential Highlights

2. Cost of Residential Homes in the Portland Metro Area for May 2003

3. Long-Term Mortgage Rates

4. Portland Weather

5. Buying Your First Home

6. A Summer Meal Using Local Produce

Portland Home Market

June had new listings rushing onto the market nearly as fast as children rushing out of school.  Before May 2003, the metro area had never listed more than 5,000 properties in one month.  Now with June, the market reached toward 6,000.  June's 5,765 new listings topped those entered during June of 2002 by 41.9%.  Pending and closed sales climbed as well, up 23.2% and 12.6%, respectively, comparing June 2003 to June 2002.

June's rise in pending and closed sales helps account for the fact that, despite all the new listings, the inventory of residential properties is lower than ever.  Given the month's rate of sales, the 10,480 active residential listings at June's end would last 3.8 months.

Second Quarter Report

Compared to the second quarter of 2002, all indicators show increasing market activity for the second quarter of 2003.  New listings are up 10.4% (14,088 v. 12,767). Pending sales are up 9.5% (9,125 v. 8,337). Closed sales are up as well, rising 6.8% (7,975 v 7,471).  The average time a listing remained on the market dropped to 62 days from 66.

Appreciation

To measure price appreciation, the last 12 months are compared to the 12 months immediately before them.  The average sale price for those two time periods rose from $204,700 to $214,900 (up 5.0%).  At the same time, the median sale price rose from $172,000 to $180,000 - an increase of 4.7%.

Cost of Residential Homes in the Portland Metro Area

Area

Average
Sales
Price

Percent
Appreciated
 **See note

North

5.9%

Northeast

5.9%

Mortgage Rates Start Climbing Up

August 1, 2003 

In Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 6.14 percent, with an average 0.5 point, for the week ending August 1, 2003, up from 5.94 percent last week. Last year at this time, the 30-year FRM averaged 6.43 percent. This is the highest this figure has been since the week ending December 6, 2002, when it was 6.19 percent.

The average for the 15-year FRM this week is 5.44 percent, with an average 0.5 point, up smartly from last week's average of 5.27 percent. A year ago, the 15-year FRM averaged 5.84 percent. This is the highest this figure has been since the week ending December 13, 2002, when it averaged 5.46 percent.

One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 3.68 percent this week, with an average 0.5 point, just barely up from last week's average of 3.67 percent. At this time last year, the one-year ARM averaged 4.45 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

"Total home sales rose slightly in June from the previous month to an annualized pace that was almost seven percent above all of 2002's record pace. In addition, applications for home purchase last week remained strong, growing to nearly 13 percent above the average for the first half of this year," said Frank Nothaft, Freddie Mac's chief economist. "Signs that the economy may have turned the corner led to slightly higher mortgage rates, and this will surely begin to slow the pace of refinancing as we go into the last quarter of the year.

"With the recent uptick in fixed-rate mortgage rates, we are starting to see short-term mortgage rate products, like the one-year ARM, gain in popularity. Indeed, the ARM share of applications steadily increased over the last month to around 20 percent of applications last week, according to the Mortgage Bankers Association of America."

Portland Area Mortgage Rates

To check on local mortgage rates go to Bankrate.

Portland Weather
Tracking the Moisture and Sunshine

Water Year:  October 1 - September 30

Portland's rainfall is measured according to the "water year" which is from October 1 through the end of September.  Since we receive only a few inches in the summer months, the rain months are from October through May.  Almost half of Portland's annual rainfall falls in November, December, and January.  Our average water year precipitation is about 40 inches.

Water Year:  Measurements From Portland Airport Weather Station

July Dry and Hot

Although the final figures have not been released, we're certain July 2003 will go down as one of the hottest months on record.  We have had numerous days in the mid to high 90s and an occasionally 100.

Rain in the Summer

You can see by the chart above that the weather folks couldn't even get a reading from their rain gauges so they just recorded "trace."  Considering that the July monthly average precipitation is only .70 inches, we wonder what the people who check the rain gauges do in the summer.  They probably play "gin rummy" with the Maytag repairmen.

Finding a Home to Buy
June 2003 - Home Financing.  September 2003 - Remodeling a Home.

In the June 2003 MTP issue, we talked about home financing and suggested (strongly) that one should obtain financing before you begin house hunting. That simple and easy step is called getting "pre-approved" (i.e., how much you can borrow).

This month the topic is "finding a home to buy."  Most of what I am going to tell you is about "finding the neighborhood" where you want to buy a home.  Many of you are already homeowners and know the ropes - the intended audience is for the "first time" home buyer.

What is Your Objective in Buying a Home

We all have a different motive for buying a home. Some want a secure place for their family while others want to make certain that the home appreciates in value. My husband's motive is to find a home that needs TLC and remodeling - he loves projects. Most of us have multiple motives; we want a comfortable home that doesn't lose value over the years. We want safety and neighbors that share our values.

Another motive may be to find a home for investment purposes (rental). According to Tom Lundstedt, who bills himself as "the funniest investment and tax speaker in America," one out of 100 people invest in real estate. Tom also says "that only 4 out of 100 real estate agents invest in real estate." Investing in real estate can take many forms: office buildings, shopping mall, apartment building, detached single-family homes, and condos.  But this is a topic for another newsletter and after attending two of Tom Lundstedt's seminars, I have plenty of material to offer.  Plus we have created a spreadsheet to help you with analyzing a property for investment purposes.  You will see it all in a future newsletter.

Finding The Right Neighborhood

We suggest finding a neighborhood first and a home second.  We realize this is not always possible as many people are under a time constraint to buy immediately because of a job transfer.

Urban, City or Suburban?  The demographics of the City of Portland neighborhoods are not unusual as the citizens of this country are finding that city living has many advantages. The most expensive real estate in the Portland metro area is downtown and in the West Hills. In early 2003, the Pearl District in Northwest Portland, became the highest priced (as measured by the square foot) real estate in the metro area.

Safe Choice - Southwest Portland

North Portland's average home price through June 2003 of just over $152,000 stands in sharp contrast to the southwest Portland's average home price of $315,600 (year-to-date). But that doesn't mean you can't find a home in Southwest Portland for $200,000 or less. It just takes more patience and time.  Most likely you will have to compromise on the size and quality of the West Side home, but you will get the neighborhood you desire.  It is much easier to fix up a home than a neighborhood. 

In mid July 2003, I found 20 homes listed for sale in Southwest Portland for $200,000 or less.  All had a least 3-bedrooms and 2-bathrooms and I found eight more with 3-bedrooms and just one bathroom.

Scouting the Neighborhood

Below are some suggestions for scouting a neighborhood:

• Find a neighborhood of historic or architecturally interesting homes which have been neglected. This can be as small as a 4-8 block area within a neighborhood.
• Live on the edge! The fringes of many quality neighborhoods are usually in transition as people discover they can live on the edge of a good neighborhood. These "fringe homes" usually sell for much less than homes within the core neighborhood.
• Take a drive through the neighborhood at different hours and days of the week. Will you find moms and dads waiting with their children at the curb in the early mornings for the bus? If so, a good sign. What is happening on a Saturday evening? Or any evening?  Will you see people "out and about" walking their dog?  Will you see children playing?
• Get out of the car and walk. Or get on a bike and pedal through the area. You can see a "thousand" times more walking or pedaling than driving.
• Note the lawns. The absence or presence of security devices such as chain link fences.
• Talk to the neighbors. Talk to the store owners. Ask them about changes in the neighborhoods.
• Do you see homes being remodeled?  New paint jobs?
• Try to spot trends. For example, can you detect any changes in the school test scores the last 2-3 years.
• If you have children or plan to have children, call the school principal and request a meeting. Most school administrators realize they are in competition with other public schools as well as private schools and they need to create a favorable public image. Ask him or her about the test scores for the last few years.  Ask about teacher turnover.

Public Transportation Can Affect Prices

I have made a point of driving along North Interstate Avenue where the new MAX Light Rail line is being built (due to open in the Fall of 2004) every few months for the last two years.  I have noted all the new businesses and general "cleaning up" of the commercial establishments along Interstate. These are positive signs for economic growth and home appreciation in the area. Imagine walking a few blocks to a train that whisks you off to your job downtown instead of having to drive and pay for parking.

Other light rail lines and street car routes are being planned for the metro area, mainly in the southeast corridor.  Of course, these are years away from operating and many factors can cause their cancellation or rerouting, but if you can stand the risk, these are areas you may want to consider looking for a home.  You may want to visit the Portland area Metro Council Web Site to view their transportation planning agenda.

Case Study - A  Food Market Makes a Difference

The Northeast neighborhood of Concordia begged a number of large supermarket chains to build a store in their neighborhood a few years ago.  All refused.  But a upstart company by the name of New Seasons Market was willing to take a chance.  They built a market at NE 33rd between NE Alberta and NE Ainsworth. Many people in the area said the market changed the neighborhood and all for the better. You may want to visit their Web site to determine where they are going to build their fifth store.

A Summer Meal Using Local Produce

It really struck us this week that we have changed our eating habits since moving back to Portland.  We eat better and we eat healthier. We make an effort to purchase Oregon (and Pacific Northwest) foods because they are usually fresh and tasty. This is easier in the summer than the winter.

The Willamette Valley is ideal for growing many foods. After all, that is what brought the settlers to this country via the Oregon Trail. It gives us a "good feeling" to know that we support our local fisherman, farmers, and ranchers.

Oregon Meats

With the ocean close by, fish is plentiful and we find ourselves eating it at least twice a week. Some Oregon ranchers created their own brand of beef a few years ago called Oregon Country Beef.  Their mission statement states that ". . . our goal is to provide a sustainable means through a group to profitably market quality beef products desired by the consumer while retaining every possible bit of independence."  Knowing the individualism of ranchers, this must have been a formidable task to work together.  Oregon County Beef has great flavor and we don't pay any more for this beef (we usually buy it on sale) than other beef.

We also purchase organic chickens with the "Rocky" and "Rosie" label at numerous food stores in Portland.  We recently discovered an Oregon grown organic chicken at the Saturday Farmer's Market and we like it even more.  Yes, they cost more than the big supermarket chickens but the taste is ten times better.

A Midweek Meal Using Local Ingredients

Midweek in late July, we created a salmon/lettuce/tomato salad and all the ingredients were Oregon grown. The Chinook salmon was purchased at the Saturday Farmer's Market and caught by Oregon fisherman off the Oregon coast. The tomatoes were also brought at the market.  The lettuce was from a small retail market and the sign in the produce section read "local lettuce." It was so delicious on Tuesday evening, we duplicated the salad for a picnic dinner at the Thursday evening Oregon Zoo concert featuring Oliver Mtukudzi.

SW Beaverton-Hillsdale Highway
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Portland, Oregon 97221
(503) 297-1033

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Susan Marthens
Real Estate Broker, GRI
(503) 497-2984
Fax (503) 220-1131

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