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

In This Issue

1. Portland Home Market - April 2003 Residential Highlights

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

3. Long-Term Mortgage Rates

4. Portland Weather

5. Update on Elections

6. Buying Your First Home - Financing

7. The Bungalow Home Style

Portland Home Market

Even April showers could not dampen the Portland metro area market.  Folks who wanted to sell, did so rain or shine, as the 5.4% increase in new listings indicates (April 2003 vs. April 2002).  A few showers may even have given more people incentive to have a roof over their heads.  Witness pending sales increasing 1.5% and closed sales growing 8.4%.

Year-to-Date Trends

Comparing January-April 2003 to the same period in 2002, all market measures show substantial growth.  The market has already generated 6.4% more new listings, 7.3% more pending sales, and 6.9% more closed sales.

Appreciation

Comparing the average sale price for the 12 months that ended in April 2003 ($213,100) to that for the 12 immediately prior months ($202,800) shows an increase of 5.1%.  Median sales price shows a 5.3% increase ($179,000 vs. $170,000).

Affordability

Affordability in the Portland metro area shows that a median-income household (HUD: $65,800) has 62% more income than necessary to afford a median-priced home ($180,400 in March).  The statistic is based on a National Association of Realtors (NAR) formula that uses the average interest rate of a 30-year fixed-rate mortgage (Freddie Mac: 5.75) and a 20% down payment.

Cost of Residential Homes in the Portland Metro Area

Area

Average
Sales
Price

Percent
Appreciated
 **See note

North

6.8%

Northeast

5.7%

Housing Boom Continues with Another Record Low Increase Rate

May 29, 2003 

In Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 5.31 percent, with an average 0.6 point, for the week ending May 30, 2003, slipping from 5.34 percent last week. Last year at this time, the 30-year FRM averaged 6.76 percent. This figure sets yet another record low.

The average for the 15-year FRM this week is 4.73 percent, with an average 0.6 point, unchanged from last weeks average of 4.73 percent. A year ago, the 15-year FRM averaged 6.22 percent. This figure ties last weeks record low.

One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 3.63 percent this week, with an average 0.6 point, up very slightly from last weeks average of 3.61 percent. At this time last year, the one-year ARM averaged 4.76 percent.

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

Low rates combined with the up-tick in consumer confidence are strong indications that the housing market will continue to prosper into the summer months, said Frank Nothaft, Freddie Mac chief economist. As it is, currently both new and existing home sales in April were stronger than originally expected."

According to the Mortgage Bankers Associations, its refinance index surpassed an index value of 5,000 for 21 consecutive weeks, a sure sign that the refinancing industry is already bustling. As mortgage rates hover at current low levels, this trend should continue for some time to come.

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

May is Cool and Gray Until The Last Week

The amount of rain is only one indicator of Portland weather.  You will see from the chart above that we had less than normal rainfall during the month of May.  But we had cool temperatures and gray days. This until the last week of the month and then summer appeared unexpectedly.  We had days in the 80s and lots of sunny days.  It cooled off on May 30th and 31st and the temperature for the Starlight Rose Festival Parade on Saturday was perfect, in the low 70s.  Especially if you were in member of a marching band. 

When Does Summer Arrive in Portland?

Normally summer comes the middle of June.  This year it appears to have started the last week of May.  Predictions for the first week of June are for more warm and sunny weather with temperatures expected in the high 80s and low 90s. 

The first forest fire of the season has already occurred in Southeastern Oregon.  We hope it a rare event and not an indication of what the summer may bring.

Snowpack Report

The May 1, 2003 Mountain Snowpack continues to reflect below average snowpacks in the Intermountain West and eastern Oregon as a result of a warmer than average winter. The good news is that eastern Oregon had strong rains in April to lessen their dry conditions.

Snowpacks improved in the eastern slopes of the Rockies in Colorado and Wyoming and in the northern Rockies of Idaho and Montana during April. Several basin snowpacks in Wyoming, Colorado, and Idaho edged up to average, or slightly above average snowpack (90% to 129%). Southwestern snowpacks have melted-out for the year and cool spring weather has delayed snowmelt in higher elevations of the West this year.

For detailed information on water resources and snowpack visit the National Water and Climate Center.

Multnomah County and Beaverton Voters Pass Tax Increases

Multnomah County Votes to Increase Their Taxes 1.5 Percent

You bet, we were nervous the night of May 20th.  In the May 2003 Moving to Portland newsletter, we predicted that the county voters would support a 1.5% tax increase.  And 58% of the voter said "yes" to the measure.

Multnomah County's Measure 26-48 won with turnout close to 55 percent. The personal income tax will raise at least $128 million a year through June 2006, the county estimates, with just over two-thirds of the money going to the county's eight school districts.

Beaverton Votes to Increase Property Taxes

In Beaverton, voters supported a three-year property tax for schools by the same margin, 58%. Washington County's elections office said more than 50 percent of registered voters turned out, a second hurdle for property tax measures since state law requires that number of voters to pass a property tax issue.

The measure will pump $17.9 million into the 35,000-student Beaverton School District next school year, saving hundreds of teachers' jobs, as well as sports, music and library programs.

Hillsboro Schools Cut 17 Days

The school year ended 17 days short for students in the Hillsboro Schools.  After running out of time to seek alternatives, administrators chose to cut the number of school days -- the biggest cut in the state -- and blamed dwindling state revenues.  Many question whether decisions made by administrators and the school board during better financial times cost the district's nearly 19,000 students at least some of those 17 days of school.

District leaders estimated they would receive $15 million less in state revenue and cut the 2002-03 budget of $130 million to $114 million. But $1.7 million could have been saved had two decisions been made differently.

One decision was in 1999 when the school board decided to pay for a new $7.3 million administration building out of the general fund instead of asking voters to approve a bond. That decision takes $550,000 a year for 20 years out of cash otherwise used for day-to-day operations.

Planning for Your First House - Financing
July 2003 - Finding a Home to Buy.  August 2003 - Remodeling a Home.

Owning a house has made Klick the envy of his peers. "A lot of people say, 'I wish I could do that,'" he says. He tells others he's not so special. "They can (buy a home) if they choose to, but it's all about priorities and choices." Sure, it's a fixer-upper and he has lots of work ahead of him. But he is on the road to financial security.

Buying a home is a lot easier than you think it is.  And with interest rates the lowest they have been in 40 some years, it pays.  Having a good credit history and being relatively free of debt will make it easier.  If either are a problem, you can fix them. Then buy a home.

Don't DELAY

Many people delay buying a home because they keep thinking, "I'll wait until later so I can afford my dream house." Better to buy a home you can afford now and improve it and then sell it.  Keep the cycle going by selling, buying, and improving.  Work your way up to your dream home.

The First Step:  Obtain Financing Before You Begin House Hunting

One thing everyone in the housing industry agrees upon is to get financing before you begin house hunting.  That simple and easy step is called getting "pre-approved" (i.e., how much you can borrow). Without getting pre-approved, you could be out looking at $175,000 houses, find one you love and have the bank/lender come back and deny you financing because you don't qualify.  This is heart breaking and you don't want to go through such disappointment.  It's better to know upfront what you can afford.

What Does Pre-Approved Mean?

Most mortgage brokers and direct lenders will perform this task without any charge. They can tell you quickly how much you qualify for in a mortgage and that their firm is approving you for that mortgage (subject to all the final steps, of course).  

In a pre-approval, the broker/lender verifies the information you provide and checks your credit. In the eyes of a seller, when an offer is presented on a home, a pre-approval can strengthen your offer. 

Obtaining a pre-approval from a broker or lender does not obligate you to actually obtain a mortgage with that firm. You can switch after you obtain the letter should you find better terms.

How Much Can You Afford

The amount you can spend on a house depends on these factors:

• Income.
• Amount of cash you can allocate to the transaction.
• The mortgage terms available in the market at the time you are shopping.
• Existing indebtedness.

Mortgage terms include interest rates, points, term, down payment requirements, and the maximum allowable ratio of housing expense to income. In addition, affordability may be affected by your existing indebtedness if this is higher than the indebtedness that lenders are willing to accept, and by closing costs which vary from one part of the country to another.

Shop Until You Drop for the Best Rate

Make certain you shop for the best rate.  It's your money and remember you are dealing with bankers and loan people whose job is to maximize profits.  You must be pointed and not afraid to ask questions.  You have to balance finding the best rate with a reputable organization that will offer you premium service.

Here is an example of only one percent point difference on a 30-year Fixed Rate Mortgage (FRM) on a loan of $150,000: 

• 5.125% rate = monthly payments of $817.00
• 6.125% rate = monthly payments of $911.00

This is a savings of $94 dollars per month.

The Difference Between a Mortgage Broker And a Direct Lender

A mortgage broker is an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages. Mortgage brokers normally pass on the actual funding and servicing of loans to capital sources who act as loan "wholesalers." A mortgage broker is also an independent contractor working with numerous wholesale lenders at any one time.

A direct lender is usually a bank or other financial institution such as a saving & loan.  They only differ in one aspect from a mortgage broker in that the direct lender will fund the mortgage.  They have the money to make the loan.

Oregon Law and Regulations:  Mortgage Brokers and Mortgage Bankers

Oregon statue ORS 59.969 requires new education and testing requirements for loan originators (i.e., mortgage brokers and mortgage bankers), however, there is a grandfather clause allowing loan originators who have been working as a full-time loan originator for at least three years as of January 1, 2002 to skip the entry-level education and testing requirements.

The same definitions that define what qualifies as being a mortgage banker or a mortgage broker also carve out certain types of people and companies that aren't covered by the definition even though they may engage in the same activities as their licensed counterparts. It's important to ask any broker or banker if they are licensed by Oregon Statue ORS 59.969.  Bankers will usually tell you that they are subject to the banking regulations which is a way of saying they either don't know, don't want to tell you, or they are not subject to ORS 59.969.

To learn more about Oregon laws and rules concerning mortgage lenders, visit the Oregon Division  of Finance and Securities Web site.

Checking for an Oregon License

There are approximately 1,500 mortgage lenders with 2,500 - 3,000 branch locations licensed in Oregon according to the Oregon Division of Finance and Securities.  You can visit their Web site to search for licensed lenders.  You can search by name and office location.  You can also download an ASCII file of all Oregon licensed mortgage lenders.

If you decide to search by location (i.e., Portland), you will note that some companies have a "red" star beside their names.  The red star next to licensees' names on the internet site indicates that the division has either received a consumer complaint about the company or has opened an investigation.  According to the instructions on their Web site, "If an asterisk appears following the company name, call (503) 378-4140 for more information".   

Finding a Reputable and Competent Mortgage Broker or Lender

"Has it funded yet" is a universal code by realtors. It means has the lender transferred the monies to all the parties. 

Nothing is more frustrating to a realtor than having delays due to paper work problems with the lender.  Mortgages frequently involve both the seller and buyer having multiple transactions - they both are selling homes and buying homes. So if a delay occurs in any of the transactions, it may affect the other transactions.  This may mean that both the buyer and seller cannot move according to schedule. Delays mean getting approval (via legal addendums) from all parties to extend the closing date.

In May of this year, two transactions have been delayed due to poor service by the lenders.  In one case, the lender, after having approved the buyers weeks before they found a home, announced that they would not finalize the transaction.  So we had to find another lender, which delayed the move.  In another, the lender was not licensed in Oregon so they had to complete that process.  Even after getting Oregon approval, they had delays which they chalked up to "the surge of business in the mortgage industry."  The lender was from the buyer's home states. 

I do have a list of mortgage brokers and lenders that I have the utmost confidence in and will gladly supply you their names/addresses/telephone.  They also appear on the Moving to Portland Web site under the heading "Mortgages".

Learn About Mortgages

Jack M. Guttentag, emeritus professor of finance at the Wharton School of the University of Pennsylvania, has a Web site at http://www.mtgprofessor.com that does an excellent job of explaining the mortgage process. 

Next Month Article

We will talk about how to find a home.  Topics discussed are scouting neighborhoods, making an offer, and home inspections. In August the subject is home renovation.  My husband considers this the fun part.  Women usually aren't as excited about this part.

Architectural Styles:  The Bungalow

The bungalow, among the most popular house styles of the Arts and Crafts movement, was widely embraced in middle-class America from 1905 to 1930.  Even Sears Roebuck sold them in their catalog as prefabricated homes. See drawing at left.

This charming residential style revolutionized housing for the middle class and there's a bungalow revival almost a century later. We see many builders offering a bungalow among their repertoire of homes.

Today's bungalows are very different from the bungalow of early 20th century.  Now people want at least two full baths and a walk-in closet.  They want attached garages, playrooms, offices, and master suites.  Far cry from the dark gallery kitchens and one-garages suited to a "Model T" rather than an SUV. 

To save money, most new or remodeled bungalows feature composite wood products for their painted interior trim, which costs about half the price of paint-grade wood.  Here are some other cost-wide design tips which apply to both new and remodeled bungalows:

• Use Wood Where it Counts  Windows, doors, floors, mantels and bookcases, kitchen cabinetry. If you paint interior trim, go with a composite wood product. 

• Treat Cabinetry like Furniture  Store dishes, not food in kitchen cabinets.  Build closet/pantry with easy-access shelves for appliances, canned goods and foods.

• Windows and Placement  Create an added sense of space and light with fewer, larger windows.  Keep sight lines in mind by raising and/or lowering windows for more privacy.

• Don't Skimp on Character  Wood bookshelves on either side of the fireplace and kitchen banquettes are beautiful and practical.

• Choose High-End Materials Where it Counts  Real brick on porch piers; tile on kitchen counters, bathroom and mud-room floors; high-quality woods on kitchen-island counters.  Cut costs with durable vinyl tile in hidden utility and pantry areas.

Bungalows are the most requested type of architectural style visitors to the movingtoportland.net Web site inquire about. Portland has hundreds of bungalows.  They are located mainly in Northeast and Southeast Portland.

Bungalow Resources

• The Bungalow Company in Bend, Oregon offers just about everything a wannabe bungalow owner needs.  It includes books, guides, 28-plans online, etc.

• The American Bungalow Magazine  An excellent resource for people considering owning a bungalows as well as existing owners.

SW Beaverton-Hillsdale Highway
Suite 100
Portland, Oregon 97221
(503) 297-1033

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Dasan Design
(503) 819-0011
Fax (503) 224-9083

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

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