Portland Real Estate Market thread [Archive]

MarkDaMan

12-07-2006, 09:33 PM

It's a great time to buy a house, right? Maybe.
Sunday, November 26, 2006
DYLAN RIVERA
The Oregonian

Portland hasn't seen a housing market like this one in at least 10 years.

Listings are up. Sales are down. Buyers, sensing an edge, are leaning hard on prices. The region's 7,000 or so Realtors are working harder to sell homes.

So it's a great time to buy a house, right? Maybe.

Most people who want to buy would also need to sell their own house, putting them on both sides of the market. And what if you pay for a house now and its value goes flat or down a little?

"If I'm not selling it tomorrow, I don't care what it's worth," said David Morganstern, a personal financial adviser with CMC Advisers in Portland. "You should buy a house for all the fundamental reasons about enjoying it as a place you live in, as opposed to, 'Is it a salable piece of property?' Then you're a speculator, not a homeowner."

The frenzied days of 2005 notwithstanding, most people make housing decisions based on lifestyle changes -- not market timing. That's why after three years of considering it, Pat and Todd Salvo put their four-bedroom Lake Oswego house on the market about a month ago. After their second child left for college, the house felt too empty, Pat Salvo said.

"It's a little slower than I would have expected," she said. "The people who are looking at this period of time are pretty serious about it, I find."

Some economists predict the national squeeze on home prices that took hold this year will grow tighter in 2007, especially in high-priced markets in California. But all real estate is local, and analysts say the fundamentals are in place for the Portland area and Oregon to weather the downturn better than most.

Even the national consulting firm Economy.com, which holds one of the most bearish outlooks on housing, predicts the Portland-area median home price will drop by less than 1 percent in 2009, after peaking next year. That's a far cry from the 11.7 percent decline forecast for Detroit by the end of this year and the 9.9 percent decline predicted in Sacramento in 2008.

The region is growing in jobs and population, interest rates remain near record lows, and the artificial land shortage created by the urban growth boundary all help to shore up Portland area housing.

Yet, there's enough uncertainty to give even the econometrics geeks the willies.

"It's a particularly risky year, and you want to increase your investment in housing? I'm not so sure," said Mark McMullen, senior economist for Economy.com who covers the Portland area.

As with all personal financial decisions, this one depends on where you are in life -- and in mortgage.
http://www.oregonlive.com/search/index.ssf?/base/business/1164414328247240.xml&coll=7

Urbanpdx

12-08-2006, 08:34 PM

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/116555013028440.xml&coll=7&thispage=1

Housing outlook in 2007? Weaker
Real estate - Two experts predict there will be a shift to a buyer's market with a slowing in the rise of prices
Friday, December 08, 2006
DYLAN RIVERA
The Oregonian
The Portland area housing market will further weaken in 2007, two economists told a gathering of the Home Builders Association of Metropolitan Portland on Thursday.

Prices will still rise, they predicted, but at a lower rate. Some areas, such as the condo market, could see even more downward pressure on prices because of oversupply. Sellers who think they have the upper hand now -- despite buyers who argue the other way -- could be in another world next year.

"It's going to be a shift to a buyer's market," predicted Jerry Johnson, of the Johnson Gardner economic consulting firm in Portland.

Johnson discussed the local housing market and Dae Baek, acting chief economist for the state, analyzed the state and national economies during the association's annual housing forecast breakfast. Much is at stake next year, which may explain the larger-than-usual crowd of about 600 people at the Oregon Convention Center.

The recent housing boom has drawn thousands of people to the real estate industry, helped propel the state's economic growth and generated billions of dollars in wealth that spurred the national economy. But recent signals of a weakening market, locally and nationally, have created new worries inside and outside the industry.

For several years, forecasters warned of a cooling market, and only this year did reality appear to follow expectations, at least in the Portland area. Inventories rose gradually through the spring and summer. The region's median sales price began a seasonal decline in late summer, earlier than the typical fall slowdown.

What to expect next year? A little unclear, but definitely a weaker market. The economists shirked away from presenting specific appreciation rates, though Johnson said Portland-area home prices will rise about 5 percent to 8 percent next year, compared with the recent high teens of 2005 and early this year.

Housing permits and starts are "in the throes of a sharp correction," Baek said. Housing permits in Oregon were down 14 percent this year through October, compared with the same period last year. Permits declined 23 percent to 36 percent in the Bend and Medford areas; 6.3 percent in the Portland area and 6.4 percent in Salem.

The cooling housing market will continue to drag the state's economy, Baek predicted. Jobs will be lost in housing-related industries, he said, and rising inventories and pressure on prices could make consumer feel less eager to spend money at retailers.

The problem of high inventory may be "darker than it shows in statistics," Baek said, because sale cancellations might not be fully reported in those figures.

Yet, inventory levels in the Portland area are still lower than those nationwide. And mortgage interest rates remain relatively low, which helps make housing affordable, Baek said.

Baek said he expects many sectors of the state's economy to contribute to job growth. Population growth would also help, he said.

"That will surely help moderate the pain coming from the housing sector," he said. "2007 is a slower year, but the economy will not tank and if you hang in there, the second half of 2007 will be better."

Both Baek and Johnson said population, job and wage growth are helping mitigate the housing downturn in the region.

"It's not a demand problem, it's a supply problem," Johnson said.

The supply of homes for sale may be rising, Johnson said, but only because builders haven't pulled back enough. Building permits should have fallen 10 percent this year, but they fell 6 percent, he said, "so we still have some more to go."

Johnson was particularly concerned about the condo market. Although there are about 4,000 urban condos in the works, there are about 16,000 planned throughout the region, including many small projects that are not easily tracked, he said.

All that inventory could increase the number of buyers withdrawing from sales contracts and lead to falling prices, he said.

This seems to be at odds with the view of many real estate agents in the urban market, who consider their market distinct from the suburbs.

"If you bought a spec condo last week it was probably a bad buy," Johnson said. "But if you bought it two years ago it's probably OK, but will be giving some (value) up."

Dylan Rivera: 503-221-8532; dylanrivera@news.oregonian.com

MarkDaMan

12-11-2006, 05:23 PM

For builders, ’07 is time to remodel
by Libby Tucker
12/11/2006

New home construction is slowing, but builders will find plenty of home remodeling and commercial work in 2007, economists say.

Residential permits are down 6 percent over the last year in the Portland metro area and down 14 percent over the last year in Oregon, according to the state’s Office of Economic Analysis.

Rising interest rates and the high price of land have made home building less profitable for developers and contractors and left new homes pricier for consumers.

“There’s a bit of an affordability crisis,” said Jim Rudd, CEO of investment advisory firm Ferguson Wellman Capital Management Inc. and chairman of the Federal Reserve Bank of San Francisco’s Portland branch. “But we believe we’ll have a soft landing, and the declines in housing will be picked up by commercial construction.”

Good news, bad news

The housing slump has led to a decline in Oregon’s residential construction employment, Dave Baek, the acting chief state economist, said in a presentation Thursday at a Home Builders Association of Metropolitan Portland housing forecast breakfast.

And demand for new housing is expected to drop another 10 percent to 15 percent in 2007, said Jerald Johnson, a principal at Johnson Gardner LLC, a real estate development and land-use consulting firm.

But overall construction employment in the state is still growing thanks to office, industrial and public projects, Baek said.

The Oregon economy picked up 9,500 construction jobs between October 2005 and October 2006, according to the Oregon Employment Department.

And the state anticipates “robust” population growth next year, which would “surely help moderate the pain coming from a housing slowdown,” Baek said

Home builders pursue other options

To keep a steady paycheck, many residential builders may turn to home remodeling work, expected to be a strong industry segment in 2007.

“Other remodelers like myself are seeing next year as being strong and vibrant,” said Bill Markt, co-owner of Markt & Co. Construction, a Portland company that specializes in home additions. “People tend to stay where they are and remodel if new construction becomes too prohibitive cost-wise, either because of cost of construction or of interest rates.”

Sixty percent of homeowners, or 452,000 households, in the four-county metro area plan to undertake a remodeling project next year, according to research by Vista Market Intelligence, an advertising and marketing consultancy.

That would amount to a $2.6 billion market, said David Ludwig, president of Vista.

Class-A office construction is also expected to pick up next year, as job creation leads to a demand for more space while vacancy rates in Portland’s central business district decrease from the third quarter’s 6.3 percent, Rudd said.

And while condominium construction likely will wane due to an excess supply in the Portland area, Ludwig said, commercial construction is expected to remain robust as builders take on more public projects.

Nationwide, construction employment dropped by 30,000 in the last year, due mostly to layoffs in the residential segment, according to Ferguson Wellman’s Rudd.

But overall, Rudd said, the nation’s economy has fared well, picking up 132,000 jobs in the last 12 months.

“Despite continued declines in the manufacturing and construction employment segments, those unemployed people are being absorbed into the greater economy,” Rudd said.

http://www.djc-or.com/viewStory.cfm?recid=28537&userID=1

BrG

12-11-2006, 08:18 PM

My opinion.

The flattening of the speculation boom is due in large part to this combination:

-18 continuous quarters of interest rate hikes (not counting the last 2 where they remained flat)

-the meteoric rise in costs of construction over the last 24 months. It's astonishing...and it's passed along to the unit cost of the condos. Everything from steel, to concrete, to window systems has seen a huge increase in cost in the last 24 months.

-demand based increases in land/housing costs. (planned Urban renewal projects coming to fruition, and the availability of low cost loans...)

These all do not jibe with the lack of associated rise in wage income. The percentage of income dedicated to housing in Portland has gone up meteorically for home buyers. Particularly first timers.

Our home is valued at twice what it was 5 years ago, for a buyer today. Most people do not earn remotely close to twice what they did 5 years ago, for doing the same job.

Urbanpdx

12-12-2006, 04:55 PM

Don't forget the effect of the high cost of construction defect litigation and insurance along with increasing permit and SDC costs.

Urbanpdx

12-15-2006, 11:04 PM

Residential real estate market slows
Portland Business Journal - 12:51 PM PST Friday
Home buyers had more to choose from in Portland last month, but they still had to pay higher prices than they would have the year prior.

According to November statistics released today by the Regional Multiple Listing Service , there were 8.5 percent more new listings in November and 17.5 percent fewer sales closed. Together, that created an inventory of listed homes sufficient to answer demand for about five months, far higher than the halcyon days of 2005 when the inventories dropped below two months.

It also took longer to sell a home in November -- 51 days this year versus 38 in the same period a year ago.

But home sellers were rewarded for their patience -- the average home sold for $320,200, a 14.4 percent increased over the same period in 2005. The median sales price rose to $278,000, from $252,500.

Oregon City/Canby and Lake Oswego/West Linn tied for the slowest-moving markets, with homes taking an average of 64 days to sell.

Milwaukie/Clackamas boasted the greatest home appreciation -- 20.5 percent.

MarkDaMan

12-15-2006, 11:07 PM

c'mon market...slooow down more...slooower...sloooooooower...I'm so close to being able to buy my own house, I just want the market to be a bit more in my favor, once developers start offering incentives on condos, I'm snapping one up!

Dougall5505

12-15-2006, 11:14 PM

are you seriously considering getting a condo? that would be so cool, if it was in sowa or pearl you would have such easy access to construction updates. or maybe thats out of your price range cuz i know it sure is out of mine!

MarkDaMan

12-15-2006, 11:19 PM

Dougall5505

12-15-2006, 11:22 PM

good luck!

Urbanpdx

12-15-2006, 11:28 PM

Mark, this might be helpful:

http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH

NorskyGirl

12-16-2006, 02:33 AM

That's a great little calculation tool. It makes the rent v. buy comparison process so much simpler. Thanks, Urbanpdx.

robbobpdx

12-16-2006, 06:14 AM

^we'll see...that's why I'm waiting for the softening to continue, especially since I can't afford to loose value on my first place. I'm seriously considering the 1700 building. It wont be completed for two years, but if I reserve my unit in the near future, I can stomach renting until its complete.

Is there a website for the 1700 building yet? They've got some killer renderings. What a cool design for the windows . . . kind of a basket weave effect with them tilting one direction and then the other. And the buildings look really in the right scale for the area. Sure would like to see what the units will be like inside. If I remember from some of the articles, I think the plan is for quite a few smaller units, but probably also some larger ones. Anyway, that would be a great location.

MarkDaMan

12-27-2006, 10:06 PM

Bad news on U.S. homes front isn't spilling into Portland area
Housing - Unlike many parts of the country, the Northwest shows a double-digit year-to-year rise in values
Wednesday, December 27, 2006
FROM STAFF AND WIRE REPORTS
The Oregonian

Good news, Portland-area homeowner: Your humble abode is probably still rising in value, unlike those owned by your counterparts in much of the rest of the country.

Prices of single-family homes across the nation increased in October at the slowest rate in almost a decade, according to a housing index released Tuesday by Standard & Poor's, giving more evidence of the housing market's deceleration.

The S&P/Case-Shiller composite index showed a 2.4 percent year-over-year increase in the price of a single-family home based on prices of existing homes tracked over time in 10 metropolitan markets. For its 20-city composite index -- the monthly index, including Portland, was released Tuesday for the first time -- prices grew 2.9 percent, the slowest rate ever for that retroactively compiled data, according to the S&P index committee chairman, David Blitzer.

"Home price gains are continuing their steep deceleration," said Robert Shiller, chief economist of MacroMarkets. "We can clearly see that the monthly price declines are widespread nationally."

In its monthly statement announcing the index results, however, S&P identified two cities that bucked the national trend: "Interestingly, Seattle and Portland remain relatively strong, with annual returns as high as 14.1 percent and 13.2 percent, respectively."

The two Northwest cities were the only ones among the 20 in S&P's index to post double-digit year-over-year gains.

Six cities, meanwhile, showed average price declines. Detroit was the worst-performing market, losing 3.6 percent over the 12-month period, but joining it on the laggards list were several that had been among the nation's highest fliers in recent years, including Boston, San Diego, San Francisco and Washington, D.C.

Most analysts predict continued slowing of sales amid a bloated inventory of homes.

The data is consistent with a report from the National Association of Realtors, which showed a tiny increase in sales of existing homes in October as the median home price fell by a record amount.

The Realtors association showed that the median sale price dropped to $221,000 in October, a decline of 3.5 percent from a year ago. That was the biggest year-over-year price decline on record.

Meanwhile, the inventory of unsold homes in October reached the second-highest level ever recorded. At the pace homes were being sold in October, it would take 7.4 months to sell the currently available homes.

The Federal Reserve has been closely watching the housing market as it tries to slow the economy's growth without pushing it into a recession. The Fed has left rates unchanged for the past four meetings, after raising rates 17 straight times since 2004.

At its last meeting on Dec. 12, a statement from the Fed said, "Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market."

In recent quarters, economists had said the housing slump was creating a drag on the economy and pulling down gross domestic product growth. U.S. GDP fell to 2 percent in the third quarter amid a cooling real estate market.

The Associated Press and The Oregonian contributed to this report.
http://www.oregonlive.com/news/oregonian/index.ssf?/base/business/1167191713171220.xml&coll=7

MarkDaMan

01-08-2007, 04:43 PM

'Big price' fetches apartment prize
Portland Business Journal - January 5, 2007
by Wendy Culverwell
Business Journal staff writer

Prometheus Real Estate Group, of San Mateo, Calif., has paid an astounding $254,400 per unit -- $39.7 million -- for the City Heights Apartments in the heart of downtown Portland.

Prometheus will spend $3 million to outfit the complex's 156 units with hardwood floors, granite finishes and new appliances.

In a region where a $100,000-per-unit price is big, the City Heights sale suggests a conversion to condominiums could be in the offing, but Prometheus intends to operate City Heights as apartments.

The sale signals an end to an era in which apartments were frequently sold to buyers intent on converting them into condominiums.

With a sale price of $39.7 million, Prometheus' total commitment is $42.7 million. The property, at 1330 S.W. Third Ave., includes 8,500 square feet of street-level retail space. Starbucks and Paradise Bakery are tenants.

"We recognize it's a big price," said John Millham, senior vice president for acquisitions for Prometheus. "I think it reflects Prometheus' commitment to the Pacific Northwest."

City Heights is Prometheus' fourth Portland-area apartment investment -- it owns two complexes in Vancouver and one in Beaverton. Millham said the three are solid performers, which attracted the company's attention to downtown.

"The three assets that we have perform better than anything in our portfolio," he said.

He characterized City Heights -- formerly Essex House -- as a "beachhead" that could lead to additional purchases in Portland.

The price yields a capitalization rate, or return on the investment, of about 4.5 percent, or about two-tenths of a percent below the yield on a 10-year Treasury Bill.

"We sort of don't even look at it," said Millham, who said that once the property is revived, the new owner expects to raise rents and stabilize occupancy rates, which are currently about 92 percent. The projected cap rate is about 5.5 percent, he said.

The company paid cash, but expects to place debt on City Heights after the updates.

The 13-story building was built in 1992. The units are predominantly one and two bedrooms, with an average size of about 850 square feet. The updates are being designed by Portland's Ankrom Moisan Architects and begin in two to three months.

The deal was brokered by Phil Oester and David Young of the Portland and Seattle offices of Hendricks & Partners.

Oester said he initially expected City Heights to sell to a company that would convert the property to condominiums. In this instance, he said, the "apartment guys" presented the best offer. It's a significant turnaround for the market, he said.

"The story for increasing apartment rents is very compelling. That's a real change," he said.

Gary Winkler, a multifamily broker at Colliers International who was not involved in the transaction, agreed.

Apartments are back and City Heights is a good example of the renewed buying power of apartment operators, he said.

"It's a fact," he said. "The condo deals have slowed down."

Investors tell him they are raising rents on new leases and will likely start doing so with existing tenants in the coming year.

But there is one hitch for apartment owners -- rents still aren't climbing enough to offset rising utility costs and other expenses associated with owning property.

Not everyone is puzzled by the seemingly over-the-top price Prometheus paid for City Heights.

Stephanie Fuhrman, with multifamily brokerage Tilbury Ferguson & Neuburg Inc., notes that vacancy rates are extremely low in downtown. With essentially no new units scheduled to open in the coming 12 months, options are limited.

"Because of this, and the softening of the residential market, we have seen a convergence between multifamily values and condo conversion prices," she said.

Millham characterized Prometheus, which owns residential properties across the West, as a long-term investor.

Its strategy is to buy well-located properties that show opportunity for improvement, then hold them.

wculverwell@bizjournals.com | 503-219-3415

http://portland.bizjournals.com/portland/stories/2007/01/08/story4.html?t=printable

MarkDaMan

02-27-2007, 04:42 PM

Rental unit owners look forward to more capital
by Kennedy Smith
02/27/2007
Daily Journal of Commerce

Apartment owners are sitting pretty this year as condo conversions slow down and would-be home buyers hold off on purchases, according to local multifamily brokers.

"I can unequivocally say that 2006 (saw) the greatest dollar volume of apartment sales activity ever seen in our market," said Mark Barry of Mark D. Barry & Associates, a Portland apartment appraiser.

In 2006, apartment sales volume was around $900 million, a 33 percent jump from 2005, when it reached $676 million, according to the company.

Three factors, Barry said, point to a decline in apartment vacancies in 2007: a better economy, slow apartment construction, a loss of units to condominium conversions and a decline in single-family affordability.

"Everyone expected apartment vacancies to fall," he said. "But the big surprise was just how far and fast apartment vacancies declined."

The latest figures from the Metro Multifamily Housing Association, a Portland-based consortium of residential property managers and vendors, show current vacancies at 3.4 percent, the lowest rate in the last decade for the Portland metropolitan area.

The tides turned for apartment owners about six to eight months ago, said Kirk Ward, a multifamily broker with Norris & Stevens Inc., a commercial brokerage firm.

"But this has been the first time that rents have been increasing faster than expenses," Ward said. "We take vacancy readings on a weekly basis, and last Monday occupancy was at 96.2 percent."

Norris & Stevens manages about 8,000 apartment units in the Portland metropolitan area.

Apartment owners, Ward said, are in a good position to take their extra capital and make improvements to their properties, like new weatherization, structural upgrades or even landscape improvements.

Unfortunately for some renters, letters may be on the way to tenants informing them of rent increases, especially in close-in areas, Ward said. Renters will also see larger security deposit requirements and tightening credit requirements as owners make those capital improvements.

High-value areas like downtown are seeing record rental rates, according to the Portland office of Colliers International, a commercial brokerage. The Louisa in the Pearl District, for example, quoted rental rates starting at $1.75 per square foot, which equates to about $1,000 per month for a 650-square-foot apartment.

Gary Winkler, head of the multifamily division at Colliers' Portland office, said larger, out-of-state investors are willing to pay "almost any price" to get a foothold in the Portland market.

"A prime example of such activity was the recent Prometheus acquisition of City Heights apartments at 1330 S.W. Third Ave.," he said, "setting a record at $254,000 per unit."

Prometheus Real Estate Group is a San Mateo, Calif., investment company.

Nationwide, the largest buyers of apartments last year were private, out-of-state investors and institutional investors, each accounting for 24 percent of apartment transactions. They were followed closely by private, in-state investors at 22 percent. Condo converters made up 11 percent of the nation's apartment sales, according to Real Capital Analytics, a commercial real estate research firm in New York.

Of Portland apartment transactions closed in 2006, 32 percent were by institutional investors; 5 percent, foreign investors; 11 percent, real estate investment trusts; 16 percent, condo converters; and 10 percent, out-of-state private investors, according to Real Capital Analytics.

So what does it all mean? According to Colliers, the trends are indicative of an economy coming out of recession. The Oregon Economic Development Department projects that the Portland metro area will see population growth of 11.6 percent in 2013, and those migrating will likely seek apartment living during their first few years of residency here.
http://www.djc-or.com/viewStory.cfm?recid=28970&userID=1

MarkDaMan

02-28-2007, 06:26 PM

Local homes database turns 'green'
RMLS - Environmentally friendly information for Realtors signals good news for some buyers and sellers and starts a trend
Wednesday, February 28, 2007
DYLAN RIVERA
The Oregonian

The Portland area's most comprehensive real estate database went live with a feature Tuesday designed to help Realtors identify and sell homes with environmentally friendly features.

The change comes as good news for home buyers who want a "green" home, and for sellers who want to add eco-friendly panache to their sales pitches. Realtors also are hoping the change will help push up prices -- and commissions -- for some abodes listed in their Regional Multiple Listing Service.

"Green and energy-efficient features have emerged as some of the most important and sought-after by buyers in the RMLS service area," said Beth Murphy, chief executive of the listing service. "With the help of their Realtors, sellers will now be able to market these features in their homes and home buyers will be able to pinpoint homes with those features."

The Portland effort is by far the largest in the nation and has already led others on the West Coast to follow along, said Steve Baden, executive director of Residential Energy Services Network in Oceanside, Calif.

"What's most significant is that appraisers use the MLS to make their market-based appraisals," Baden said. "That will serve to increase the market value of energy-efficient homes."

Earth Advantage, a Portland nonprofit behind most single-family home green certifications granted in Oregon and Southwest Washington, said this week that it is already starting discussions with appraisers, mortgage lenders and insurance companies over how to take advantage of the new service.

"There's a lot that's come out of the RMLS listing push," said Sean Penrith, Earth Advantage's executive director.

Among the possibilities that could come from the ability to search in the RMLS system, he said:

Appraisers will be able to compare homes sold with and without certain features, to see which ones make the most difference in a home's sales price.

With appraisal and energy cost savings information, mortgage lenders will be more willing to write loans that give home buyers better terms.

Insurance providers may devise products that give credit for properties that have increased resistance to mold intrusion and other construction-related problems that many of the certification programs address.

News of the Portland effort has prompted agencies in Seattle, Bend, Southern Oregon and the San Francisco Bay Area to start developing standards, Penrith said.

The change in Portland was initiated by Kria Lacher, an agent with Meadows Group Inc. Realtors.

Since the RMLS board agreed to the change last fall, Lacher said she has been helping listing services elsewhere make the same changes. "I'm really excited about this," she said.

Portland's RMLS offers consumers a Web site that allows them to search for homes based by price and Zip code, among other criteria.

But RMLS members are allowed far more detailed searches and can input data. Realtors point to such access when arguing for their commissions and services.

There is little data on whether consumers are willing to pay more for energy efficiency and environmentally friendly features. Karl E. Sayles, an appraiser with Darty Appraisal Service in Melrose, Fla., said he compared the sales in a subdivision before they started using the Energy Star system and after they started using it.

The developer charged $1,500 for Energy Star features but they were valued at $4,000, he found in his analysis of about 20 sales.

Sayles said he brings up the issue to Gainesville-area Realtors and it goes over like a lead balloon. They've resisted adding such features to the listing service, he said.

"I think they'd have trouble unloading the inventory that wasn't Energy Star," he said. "I don't mean to trash the Realtors, but they're just out for a buck."

More than 1,000 Portland-area real estate agents have already asked Earth Advantage for more information and expressed interest in continuing education on the programs, Penrith said. The new search capability and Realtors' response has prompted the nonprofit to design a curriculum to educate agents, appraisers and lenders on green building.

"We've just got a flood of inquiries of people wanting to book us for the sessions," Penrith said.

For homes that a Realtor describes as under construction, new or proposed, the Web site has a pop-up menu that displays green building certification programs.

In other areas of the site, Realtors can for the first time select other green features, such as solar power, cork flooring or a 90-percent efficient furnace.

When searching for homes in the database, Realtors can search either for homes certified by one of the green programs or for any home with any of the certifications.

Dylan Rivera: 503-221-8532; dylanrivera@news.oregonian.com
http://www.oregonlive.com/news/oregonian/index.ssf?/base/business/1172636703136320.xml&coll=7

MarkDaMan

03-16-2007, 05:29 PM

Rents soar. Creatives edged out. Who will keep Portland weird?
Some small businesses that give the city its distinctive flavor are becoming victims of their own neighborhoods' success
Friday, March 16, 2007
JONATHAN BRINCKMAN
The Oregonian

Microcosm Publishing's eclectic offerings seem perfect for Portland's alternative culture: guides to anarchy, the politics of biodiesel, even "Adventures in Menstruating #2."

Yet the North Portland company closed its doors Thursday and is headed to Bloomington, Ind. -- driven out of town, the owner says, by the increasing cost of real estate.

"One of the principal incentives for coming here was that this was one of the places on the West Coast that was cheap and affordable," said Joe Biel, Microcosm's owner, who moved his then one-person company from Cleveland in 1999. "That's no longer true."

Biel's departure -- combined with the growing struggles of low-budget, edgy businesses to find affordable locations -- suggests that Portland's attractiveness is pushing back on the very people who helped create the city's progressive self-image.

"I saw the same pattern in New York," said Justin Hocking, the executive director of the Independent Publishing Resource Center on Southwest Oak Street. "This could be foreshadowing of what's to come in Portland."

Certainly, Portland remains a magnet for creative entrepreneurs and a bargain for those fleeing even higher-priced California cities. Their presence has produced hip, sometimes socially conscious, businesses such as Stumptown Coffee Roasters, Voodoo Doughnuts and worker-owned City Bikes. And rising real estate prices are signs of good health for the city and its business districts.

Yet some low-budget, cutting-edge companies are having trouble coping with gentrification that they unintentionally helped launch. The Back-to-Back Cafe, a worker-owned cafe once on East Burnside, closed for good after its building was redeveloped last spring. Rising rents have sent three bookstores --Laughing Horse, Looking Glass and In Other Words -- to cheaper locations.

"The portion of Portland that was radical is being gentrified," said Sue Burns, an owner of In Other Words. She moved the store off Southeast Hawthorne Boulevard last year when, she said, monthly rent hit $2,500 -- a tenfold increase over 10 years.

Abby Sewell, one of six former owners of Back-to-Back, said places such as her coffee shop help create the kind of place that Portland's business and political leaders brag about. "It takes away from the quality of life in the city to have places like us going out of business," she said.

Some view the rising commercial property values as positive for the city. They are proof that people want to live in an area, said Joseph Cortright, an economist with Impressa Consulting of Portland who his written extensively about the city's youth culture.

"I'd rather be us than Bloomington," Cortright said. "If people are moving there because they have cheap rent, that's not the side of the economic equation I'd like to be on."

Angry about gentrification

Biel, though, in an angry e-mail announcing his plans to move, expressed an opposite view.

"The development in North Portland around Mississippi Avenue is sickening," wrote Biel, whose publication, "A Zinester's Guide to Portland," was Powell's top-selling book early this year. "Owning property in North Portland is now reserved for the wealthy elite."

Biel faces a problem because his company is expanding. Microcosm's seven employees are already crammed in a warrenlike basement of Liberty Hall, a private community center near the Fremont Bridge. In his rented space, books and zines -- specialized magazines -- are stuffed in wall-cubbies and crawl spaces.

The company, which publishes 49 of its own zines and books and distributes hundreds of other publications, sells mostly by mail order and Internet to customers worldwide. Biel also keeps his business open to anyone who wants to stop, browse the publications and buy them without paying for postage.

"We outgrew where we are now within the first year of moving here," said Biel, a quiet man who thrives on hard work. "It's truly a wall-to-wall, floor-to-ceiling operation. It's pretty intense."

Biel said he spent much of last year looking for a larger place for his company. The criteria: It had to be affordable, and it had to be in close-in Portland, accessible to those who prefer to bike than drive. No luck. "I was very frustrated that we weren't finding a place," he said.

Last December, he concluded that smaller communities offered property values that would allow him to keep prices down. "We want to sell things at a price that we would purchase them at," he said.

Biel chose Bloomington because on a trip there he was impressed by the city's creative scene. Also, he'll save shipping costs because Bloomington is close to the Illinois company that prints Microcosm's publications.

That's not to say he won't miss the city where he's spent most of his 20s. It was here, he said, that his company found success. Microcosm grew to a company with seven employees and 2006 annual revenues of $299,000.

"I didn't know how great it was here until I arrived," he said. "One of Portland's strong points is you constantly run into people who are huge in your world."

Finding a balance

Biel left Thursday for San Francisco, where he will be giving a presentation at the city's annual book fair before reopening his business in Indiana next week. Microcosm -- and Biel -- will be missed, said Burns of In Other Words, which relocated to Northeast Killingsworth Street, near rapidly gentrifying North Williams Avenue.

"There's a big hole that will be left by having Microcosm not here and not so accessible," she said. "He's a pioneer and a beacon of light."

A social community of activists and progresses revolved around Microcosm's headquarters, said Rebecca Gilbert, co-owner of Stumptown Printers and a founder of the Independent Publishing Resource Center. She said, though, that his departure won't detract significantly from Portland's creative vitality.

"We all move around and we all stay connected," she said. "Maybe that means that his influence isn't leaving Portland community."

Philip Stanton, owner of The Mississippi Pizza Pub on North Mississippi Avenue, has seen the good side of change. When he opened his now-popular nightspot five blocks west of Microcosm Publishing in 2001, the street was mostly "hookers and drug dealers." Now it's a thriving neighborhood, full of restaurants, coffee shops, a garden store and a brewpub.

"It's a balance," he said. "You want an area to change enough to make it safe, but you can't stop it when you want it to. You lose affordability, but the advantage is that you create a village."

Jonathan Brinckman: 503-221-8190; jbrinckman@news.oregonian.com
http://www.oregonlive.com/news/oregonian/index.ssf?/base/news/1174015514278420.xml&coll=7

MarkDaMan

03-16-2007, 05:31 PM

as a renter...hopefully not for long, I agree rents have gone up, but not by thaaat much, considering my rent didn't move upward for 3 years. I'm happy to pay my landlord an extra $50 a month as I still see Portland, and the place I live, to be extremely affordable for renters. You can still find a $500 studio in NW, utilities paid, or a 3 bedroom in Gresham, Beaverton or Hillsboro for under $850.

WestCoast

03-17-2007, 05:55 AM

just had my offer accepted for a 2 bedroom condo downtown. :tup: market is still soft so it seemed like time to buy. I'm so excited, hope to close by the end of the month...one more person (plus roomate) living downtown :yes: )

MarkDaMan

04-16-2007, 05:01 PM

Dems look to restrict condo conversions
Daily Journal of Commerce
by Kennedy Smith
04/16/2007

It started when Ian Slingerland, executive director of renter advocate Community Alliance of Tenants, noticed an increase in the number of calls to the organization’s hotline.

The calls were about condo conversions, and tenants being displaced by an uptick in conversions were starting to wonder about their rights.

In response to the influx of calls, Community Alliance of Tenants, along with other tenants’ rights groups, wrote House Bill 3186, which would enforce tougher rules on condo converters.

Under the proposed legislation – backed by Northeast Portland Democratic Reps. Chip Shields and Tina Kotek – condominium converters would be required to give 120 days notice to tenants and would not be allowed to evict tenants without cause.

It would also limit the time of day in which improvements on units could be made to a 9 a.m. to 7 p.m. window.

The rule would also force landlords to pay tenants’ relocation fees at three times the amount of a unit’s monthly rent. This requirement, real estate lawyer Howard M. Feuerstein of Stoel Rives said, could make condo conversions simply too expensive to be worthwhile.

Sitting on investment

“The house bill sucks,” developer Marty Kehoe said. “It’s ridiculous. It’s going to run up the costs of construction, and it’s going to close off an entire avenue for first-time home buyers.”

Kehoe, who estimates he’s done about $250 million worth of condo conversions, says the rules now in place are fair.

“Rental rates have gone up, cap rates have gone down, the sales price of condos has returned to a more normal pace,” he said, “so the only thing this bill will do is make conversions just that much harder to do.”

But the bill, Slingerland said, is a positive step toward tenants’ rights. Current law requires landlords to give 120 days’ notice on a condo conversion project. But landlords are free to give tenants 30 days’ notice at the same time, virtually wiping out the 120-day notice rule, Slingerland said.

But real estate investor Greg Frick said “the days of 30-days’ notice with no cause are out” if HB 3186 passes.

The added regulation, he said, would “drag the process on longer and make for a lot more paperwork.”

And renters, Kehoe said, already have plenty of time to move.

“There’s a reason you buy a house, and that’s so you can’t get thrown out of it,” he said. “If you don’t want the responsibilities of homeownership, there’s a downside, and that downside is that you can be asked to move out, just like you can choose to move out.”

Market slowing down

Condo conversions have exploded in recent years, particularly in Multnomah County, according to the Realtors Multiple Listing Service. Seventy-six condo conversions were filed in the county in 2006 after just 18 in 2005 – that’s a 322 percent increase in a year.

But it’s going to be hard to tell whether the bill – if it becomes law – would be responsible for a condo conversion slowdown or if market forces would be to blame, Frick said.

“One of the trends we’re already seeing is that there’s a slowdown in the market anyway,” he said.

That makes the bill unnecessary, Feuerstein said.

“I saw this same thing about 20 years ago when condo conversions were starting to happen,” he said. “There were lots of bills and so forth, but the market did a self-correction. Some were converted back to apartments. It’s the same today; the market seems to adjust itself if there’s rental shortage.”

If you go

Public hearing for HB 3186

1 p.m. today

Hearing Room E, State Capital Building, 225 Capitol St. N.E., Salem

House Bill 3186

• Condo converters must send 120-day notice to tenants and a copy of notice to city municipalities or the mayor or county commission if outside city limits.

• A landlord may not terminate a tenancy without cause and may not unreasonably increase rent.

• A landlord must provide certification that no evictions or rent increases have taken place without cause.

• Improvements to units may only be conducted from 9 a.m. to 7 p.m.

• A condo converter must pay a tenant an amount equal to three times the Section 8 fair market rent, adjusted for unit size and type. Payment must be delivered no later than 30 days after the 120-day notice.

• A tenant may bring action against a converter to recover six times the monthly rent or twice the actual damages to the tenant arising out of termination.

http://www.djc-or.com/viewStory.cfm?recid=29287&userID=1

Snowden352

04-18-2007, 07:18 PM

I posted this already in the Northwest Economy thread, but thought considering its impact on Real Estate, it should be here, too.

Washington Mutual announces $2B program to help subprime borrowers
Portland Business Journal - 10:33 AM PDT Wednesday, April 18, 2007
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Washington Mutual Inc. said Wednesday it is starting a $2 billion program aimed to help subprime loan borrowers avoid mortgage foreclosures.

On Tuesday, when announcing first-quarter earnings, company officials said they were going to rein in subprime lending. Steve Rotella, Washington Mutual's president and chief operating officer, said there was "turmoil in the subprime sector," and told shareholders that Washington Mutual's subprime segment lost $164 million in the first quarter.

In the $2 billion program, the Seattle-based bank (NYSE: WM), which has 105 branches in Oregon, said subprime borrowers who are current with their existing loans but face payment increases may apply for "new discounted fixed-rate loans or other mortgage products," such as a 30-year fixed-rate subprime loan with the interest rate discounted by 50 basis points.

Washington Mutual also said it will offer "prime mortgage product options for borrowers who qualify."

MarkDaMan

04-19-2007, 04:20 PM

Portland home market cools
Real estate - Condo and house prices are up over last year, but it's taking longer for properties to sell
Thursday, April 19, 2007
JONATHAN BRINCKMAN
The Oregonian

Kerstin Erickson bought her condominium in The Vaux, a new luxury building in Northwest Portland, in November 2005 for $345,000. Two months ago, she put it on the market for $364,900.

But buyers have been slow to materialize. On Wednesday, Erickson lowered the asking price for the one-bedroom unit for a third time, dropping it from $354,000 to $344,900.

"I want to get rid of it as soon as possible," she said. "I'm very motivated to sell it."

Other home and condo sellers in Portland area might increasingly share Erickson's frustration, based on March statistics released Wednesday by the Regional Multiple Listing Service. The average time it took for a home to sell in the metro area increased by 44 percent over the past year, from 45 days in March 2006 to 65 days last month.

The good news is that sales prices for homes and condominiums in the Portland market continue to rise -- unlike in many other parts of the country. RMLS reports that the average sales price of a house that sold last month is 9.4 percent higher than during the same month a year ago, and the average price of a condominium is up 4 percent.

The bad news is that it's taking longer to unload properties.

Mary Ann McDowell, a real estate agent specializing in urban condos, figures the average time to sell a condominium in the downtown/Pearl District/westside area is up from 43 days the first three months of 2006 to 87 days the first three months of this year.

"It takes a lot longer to sell than when we had a really hot market," McDowell said. "For many years, Realtors thought 60 days was a safe guideline. Right now, we're above and beyond that."

Still, McDowell said that with prices holding their ground here, she doesn't mind the fact that the market has cooled. "It gives buyers more time to think and evaluate," she said.

Tim Duy, an economics professor at the University of Oregon, said that while housing sales are slower in the Portland market than they were a year ago, they aren't "disastrously slower" such as southern California.

One reason the Portland market is doing relatively well, he said, is that it never dramatically overheated. "Sales are off, but have held up very well compared to elsewhere," he said.

Jonathan Brinckman: 503-221-8190; jbrinckman@news.oregonian.com

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1176951312293800.xml&coll=7

MarkDaMan

05-23-2007, 05:45 PM

a little late for this...

State House OKs restrictions on condo conversions
by DJC Staff
05/23/2007

The Oregon House has passed a measure to add protections for tenants displaced by a condo conversion.

House Bill 3186-A, which now moves to the Senate, would require a 120-day displacement notice for tenants forced to relocate because of a conversion and would ban condo converters from evicting tenants without cause.

The bill also limits the time when construction work on a condo conversion can be completed to an 8 a.m. to 5 p.m. window.

The bill when introduced originally in the House called for mandatory relocation benefits for displaced tenants in the form of three months’ rent. That provision was removed from the measure that passed last week.

“We would’ve liked to have seen statewide assistance for tenants with moving,” Ian Slingerland, executive director of renter advocate Community Alliance of Tenants, who helped draft the bill, said Tuesday. “But local jurisdictions still have the ability to help. We’re pretty happy with this measure.”

http://www.djc-or.com/viewStory.cfm?recid=29467&userID=1

Snowden352

06-08-2007, 06:03 PM

To be honest, I'm a little shocked by this; but Forbes has rated Portland the #4 best real estate market in the country (with boring ol' Seattle on top again). Here's the tidbit:

Real Estate Feature
Best And Worst U.S. Housing Markets
Matt Woolsey, 05.15.07, 4:00 PM ET

Live in Seattle? If you own your home, chances are you're celebrating.

That's because the city's median home price in the first quarter of this year hit $380,200, an increase of 12.3% from a year earlier, according to data from the National Association of Realtors (NAR). Median home prices in the Pacific Northwest as a whole soared; in Portland, Ore., prices jumped 8.9%, and in Salem, Ore., they grew 15.6%.

Leo

10-10-2007, 02:30 AM

http://www.oregonlive.com/business/oregonian/index.ssf?/base/news/1191898514282930.xml&coll=7&thispage=1

Mostly as expected, but it gives details on sales rates in some of our favorite towers... (The Civic, John Ross, Westerly, etc.)

Some quotes are surprisingly candid:

"Nelda Newton, a senior vice president at Wells Fargo, is generally positive on condos long term but acknowledges that current condo sales can barely keep pace with cancellations."

"In the past six years, developers built 4,042 downtown condos, more than twice the figure from the previous 30 years{:eek: emphasis added}. Today, developers have nearly 2,114 condos under construction."

tworivers

11-04-2007, 02:38 AM

Very interesting specifics.

Front Porch (Oregonian)
Saturday, November 03, 2007

Portland's home sales fall at faster rate than nation's

Gerard Mildner over at Portland State's Center for Real Estate is out with his third-quarter report, and it's full of interesting notes.

Karen Thalhammer, a grad student, found Portland's existing home values were far stronger than the nation's. Portland's value rose 3 percent in September compared with the same month in 2006, but the nation's values dropped 4.2 percent. But the number of deals in Portland has dropped far faster than sales nationally. Portland is off 32 percent in sales vs. 19 percent nationwide.

Drilling down, Thalhammer found existing homes in Northeast Portland, Oregon City and Southeast Portland reported the fastest home price growth.

The places with declines? Milwaukie and, ahem, Lake Oswego.

Bend also is sucking wind. In the third quarter of 2006, the dreamy central Oregon destination reported a 30 percent jump in the median value of new and existing homes. But in 2007, the values dropped 1 percent. Construction was also way off. Single-family building permits are down nearly 50 percent in August.

In condo land, grad student Greg LeBlanc documents the chill that's fallen over South Waterfront, Northwest Portland and the Pearl. He found the number of condo sales in the first seven months of 2007 is off 21 percent compared with 2006.

After a steep increase in recent years, sales prices are drooping in South Waterfront. From 2004 to 2006, the average condo there went from $216,000 to $548,000. But in 2007, the average sale price fell to $443,000.

On a per-square-foot basis, South Waterfront's median sale price is $337, off 19 percent from the year before. The Pearl, the highest price of the trio, has leveled off at $427 per square foot.

zilfondel

11-04-2007, 09:01 PM

Hmm, looks like its falling back to realityland.

PacificNW

11-05-2007, 12:58 AM

↑ Good for buyers....

tworivers

11-05-2007, 08:24 PM

Thanks to Aya for the heads up.

NYT National Perspectives

A Small-Town Feel in an Urban Locale

By BILLIE COHEN
Published: November 4, 2007

AFTER spending several years in the South, Darrell Wallace and Jennifer Adkins of Greensboro, N.C., decided it was time to move. “We’re both artistic and politically active, and it was really hard to find peers into the same thing in Greensboro,” said Mr. Wallace, 30.

The couple chose to relocate to Portland, Ore., last spring because of “how beautiful it is, and how much the people respect the beauty and put forth an effort to maintain it,” he said.

Mr. Wallace and Ms. Adkins are not the only ones impressed with the city. Last year, there were twice as many people in the 25-to-39 age group moving into the city as leaving, according to Charles Rynerson, a demographer with the Population Research Center at Portland State University.

In all, 23,454 young adults moved in, while only 12,125 moved away, giving the city the fourth highest net migration in the country, after Las Vegas, Charlotte and Atlanta, Mr. Rynerson said. And in the over-55 age group around 12,000 individuals moved to the city.

Part of the draw is that Portland has maintained a small-town feel in an urban atmosphere. There is a vibrant restaurant and cultural scene, accessible public transportation — light rail, street cars and buses — and a population enthusiastic about the outdoors and the environment. Mount Hood is an hour east of the city and the Pacific Ocean is an hour and a half west.

Although the Portland region is home to high-tech companies, like Intel and Hewlett-Packard, along with athletic apparel companies, like Nike and Adidas, individuals often move to Portland for reasons other than work.

“If you really wanted to get rich, you might choose a different metropolitan area,” Mr. Rynerson said. “There are other places with more job growth and higher salaries, but the quality of life is what people come here for.”

Another draw is the affordable rental market. After exploring several neighborhoods, Mr. Wallace, an information technology professional, and Ms. Adkins, 26, chose Portland’s Southeast section, a popular neighborhood for young people. “It is cozy, self-contained, functional and quiet but still has plenty of stuff to do,” Mr. Wallace said.

The couple rent a studio for $595 a month. What they pay is typical for Portland. According to the Metro Multifamily Housing Association, which represents residential property-managers, the average rental price for a studio in the Southeast section is $525, while a two-bedroom apartment leases for $724. In the Northwest area, which includes the trendy Pearl District, studio rentals average $571 and two-bedrooms cost about $971.

“In Portland, people are either Eastside people or Westside people,” said Charles Turner, a broker with of Prudential Northwest Properties, referring to the geographical wall formed by the Willamette River. “If you want to be on the Westside, your price range will start a little higher and you’re going the have trees and bigger lots.”

Buying options are comparatively affordable, as well. While the rest of the country has seen housing prices boom and now fall, Portland has remained reasonably stable.

According to the Regional Multiple Listings Service for Oregon, the average sale price for a condominium in September was $257,200, up from $246,800 in 2006. The median price of a single-family detached home was $308,003, compared with $380,200 in the Seattle-Tacoma area, $595,200 in San Diego and $748,100 in the San Francisco Bay area, according to Portland State University’s Center for Real Estate.

Barnaby Willett, 34, who moved to Portland from Manhattan, found the prices so attractive that he decided to forgo his original plan to rent when he first moved to the city in 2006. “I visited my brother in late 2005, and he lived in Belmont,” said Mr. Willett, an information consultant. “I liked it off the bat. I’ve always enjoyed feeling connected to where I live, but it was harder to do that in New York.”

He said it was easy to meet people in Portland and noted that artistic expression seemed to permeate the culture. Last March, Mr. Willett bought an 865-square-foot condo in the Southeast area for $320,000.

Young people are not the only ones drawn to Portland. Richard Caplan, a broker with the Windermere Cronin & Caplan Realty Group, said that his agents recently have seen a lot of retirees moving to the Northwest district neighborhoods.

Though the city is “not strictly a retirement place,” he said, “Portland allows them to be part of the larger community, not just the retirement segment.”

Richard and Lila Suffoletto would agree. The couple, both in their mid-60s, had been living in an over-55 community in Sacramento, Calif., for three and a half years before buying a town house in the Northwest section last month. “Frankly, we were bored to tears,” said Mr. Suffoletto, who retired from a career in medical and security equipment.

Jan and Juergen Striemer moved to the city after living for more than 40 years in Los Angeles. The couple had become familiar with the area after visiting friends in Seattle and taking a road trip down the Oregon coast, a stretch of land that Mr. Striemer, 67, referred to as “one of the most gorgeous pieces of real estate anywhere on Earth.” The Striemers paid $550,000 for their contemporary house near the Pearl District. “In Los Angeles, it would’ve cost $1.5 million to start,” Mr. Striemer said.

Both he and his wife noted that Los Angeles had become too crowded, too polluted and, surprisingly, too sunny for them. “We never realized how much both of us had missed seasons and trees,” said Mrs. Striemer, 57. “Who needs another beautiful day in paradise? Give me some weather.”

From early-20th-century Craftsman-style houses to converted industrial buildings to environmentally conscious new developments, the diverse mix of housing appeals to both young and old. Two such examples are the Clinton Condominiums and the Belmont Street Lofts, mixed-use projects, developed by Randy Rapaport, where Mr. Willett bought. Mr. Rapaport said he wanted to create a development that embraced the Portland sensibility of low-impact living, clean design and community focus. “It’s about the unwritten philosophy of Portland,” he said, “that this is a do-it-yourself, local, sustainable community.” His retail tenants include a yoga studio, a hair salon and a Malaysian restaurant.

As the housing markets in Los Angeles, San Francisco and Seattle remain high, Portland has become one of the few affordable urban options on the West Coast. Couple that with its natural beauty, its activist personality and its creative sensibility and the appeal is clear. “It’s very common that someone will visit a friend,” Mr. Rapaport said, “and then they’re moving here three months later.”

sopdx

11-05-2007, 09:33 PM

Leo

11-08-2007, 02:26 PM

Fortune just released the "25 real estate market poised to fall." Portland is #23 and home prices are predicted to fall by 19% over the next 5 years. The prediction is based on price/rent ratios, which is the same thing I used for my guesstimate of a 20% drop (it's nice to have Fortune double-check your math for you :-) )

http://money.cnn.com/galleries/2007/fortune/0711/gallery.real_estate.fortune/23.html

brandonpdx

11-08-2007, 07:41 PM

Leo

11-08-2007, 11:40 PM

their assumption on average rent increase per year is off. rents have exploded in the Portland market just like the cost of homes did over the last 5 years.
The truth of the matter is that no calculation can predict the economic future of Portland's housing market.

My rent certainly has not exploded, so I don't know why you think their assumption about rent increases is off. In order for rents to increase significantly, income will need to increase significantly, and that has not happened.

I'm unconvinced that anything has happened in the last 5 years that would change the way this market has worked in the past 20 years. More likely than not, Portland will revert to the historical equilibrium, and more likely than not, Portland will behave like other markets in this country.

I was just surprised that the 19% they came up with was pretty close to what I had expected based on casual observation alone.

brandonpdx

11-09-2007, 12:49 AM

My rent certainly has not exploded, so I don't know why you think their assumption about rent increases is off. In order for rents to increase significantly, income will need to increase significantly, and that has not happened.

I'm unconvinced that anything has happened in the last 5 years that would change the way this market has worked in the past 20 years. More likely than not, Portland will revert to the historical equilibrium, and more likely than not, Portland will behave like other markets in this country.

I was just surprised that the 19% they came up with was pretty close to what I had expected based on casual observation alone.

I just saw in the Oregonian that the Alexan is going to charge about $2.20 or $2.25 per square foot. To me that is an explosion in rent. I paid about $1.20/sq ft about 5 years ago for a 1 bdrm in NW. I've also read numerous articles where competition is fierce for rentals hence rates are going up.

My thoughts are that the Portland market will return to a historical equilibrium in annual gains. I don't see Portland's home value dropping 19% in 5 years. For one, there's still a lot of folks moving here. Portland is still the cheapest city to live in on the west coast.

Leo

11-09-2007, 03:01 AM

I just saw in the Oregonian that the Alexan is going to charge about $2.20 or $2.25 per square foot. To me that is an explosion in rent. I paid about $1.20/sq ft about 5 years ago for a 1 bdrm in NW. I've also read numerous articles where competition is fierce for rentals hence rates are going up.

Do you think the Alexan will be comparable in quality, or higher in quality, than the 1bdrm you rented in NW? I also pay more for an apartment today than I did 7 years ago, but it's a much better apartment. My former apartment costs only a little more ($30) to rent today than it did 7 years ago.

I do believe that average and median rents will increase in Portland, but primarily because there will be more high-end apartments. Five years ago, high-end rentals like the Louisa and the Burlington didn't even exist, let alone rentals like the Wyatt and Ladd Tower.

My thoughts are that the Portland market will return to a historical equilibrium in annual gains.

Historically, it has never worked that way. Historically, real estate markets return to equilibrium prices, not equilibrium gains. That is why the equilibrium annual gain for same-house sales is only a little higher than the rate of inflation. (This makes sense if you think about it: if real estate really became much more expensive than inflation, there would be fewer and fewer homeowners every year, not more and more.)

For one, there's still a lot of folks moving here. Portland is still the cheapest city to live in on the west coast.

There are many people moving to Portland, but is that number larger than the number of housing units they need? The condo slump suggests that it is not. Portland may be the cheapest city with population greater than some arbitrary number, but it is not cheap compared to the incomes people make here. The beauty of the rent/price indicator is that it already factors this kind of stuff in. If in-migration was really "large enough" and prices were really "cheap enough" , then the price/rent ratio would not deviate from historical norms; rents would rise as much as housing prices, and the ratio would remain unchanged. In fact, the rental market would react to changes in supply and demand much more quickly than the housing market, so if there was really a massive influx of population, rent would go up before prices, and then prices would catch up later. That's not what happened in Portland (or anywhere else, for that matter). This is why many people use the price/rent indicator to gauge where prices will return to: it automatically accounts for any changes in the supply/demand balance that may support a sustainable increase in real housing cost.

brandonpdx

11-09-2007, 11:18 PM

Leo

11-10-2007, 07:14 PM

^The truth of the matter is that no calculation can predict the economic future of Portland's housing market.
-One can certainly have some educated guesses but bottom line is that no one really knows. There are so many unforseen x factors.
-It is just like the stock market.

True. Just like the stock market, the best you can do is try to see clearly, assess likely situations and their risks and benefits, and place your bets so you have a chance at winning without incurring the risk that you'll lose your shirt. There are no guarantees.

Really, the most surprising thing to me was that the 19% number in the study, based on price/rent ratio, turned out to be so close to my 20% guesstimate, based on the same method but using a rather anecdotal dataset...

MarkDaMan

11-16-2007, 03:53 PM

Lenders shy away from condos, but not much else
Those that specialize in green projects and bridge financing find opportunities
Portland Business Journal - by Wendy Culverwell Business Journal staff writer

Commercial lenders are filling a gap left by banks that have tightened loan requirements in the face of the subprime lending crisis.

Several local lenders are avoiding condominium construction, but are still interested in offices, apartments and industrial real estate.

State figures indicate nonresidential construction is growing at a 5.4 percent rate each year. This year, according to office market research by the Portland office of Grubb & Ellis, commercial construction eclipsed residential construction for the first time in five years.

"As we talk to our developers, I've been expecting things are going to slow down a bit, but they say they're going forward," said David Williams, president of Portland's ShoreBank Pacific.

By one estimate, some $30 billion in commercial mortgage-backed securities has no takers, forcing the lenders to hold the balance on their books. The result: Interest rates are hovering between 6.4 percent and 7 percent and underwriters are less willing to loan more than 75 percent of the value of the project than they have been in recent years.

ShoreBank favors commercial deals involving properties away from core business areas. It particularly likes developers building with sustainable materials and practices. The bank has a commercial lending program that allows it to fund sustainably designed projects even if the developer isn't putting up 25 percent of the equity.

Case in point: ShoreBank provided the construction loan for Graham Street Lofts, a $4.3 million 12-unit condominium project at Graham and Northeast Martin Luther King Boulevard.

The project had plenty to give lenders pause. It is being developed in an untested neighborhood by architect Hilary Mackenzie, who previously built houses. Mackenzie is also using concrete building blocks in place of steel or wood-based framing.

"That's a good project," said Williams, who called it an example of a builder doing something new and challenging.

In a similar fashion, President Rance Gregory said NBS Real Estate Capital is busier than ever in part because primary lenders are more likely to stick to their guns when it comes to debt ratios.

Concerned about being overextended, banks are refusing to place more than 70 or 80 percent debt on a property. That opens the door to firms such as his that provide loans and investments to bridge the gap, so-called mezzanine financing.

NBS Real Estate Capital invests in a variety of commercial properties on behalf of its two investment funds, Morrison Street Funds 1 and 2.

NBS Real Estate Capital has closed two mezzanine loans in the past month. The first, for $1.09 million, was packaged with a senior mortgage from Bank of America to buy a 96-unit apartment complex in Lakewood, Wash.

In the other, its $1.35 million mezzanine loan was packaged with a senior mortgage from an Arizona-based bank to fund the purchase of a 132-unit apartment complex in Mesa, Ariz.

"Business has picked up a lot because of the residential crunch," Gregory said. "We're doing a lot of mezzanine lending as a result."

Lenders, though, are shying away from condominiums.

Since its inception, NBS Real Estate Capital has funded just one condominium project. Seeing trouble in the overbuilt market, it stopped considering residential condominiums several years ago.

Gregory continues to favor apartments because so little supply was added during the boom in condominium construction. As a result, both apartment occupancy and rental rates are up. Around Portland, the vacancy rate for apartments is below 3 percent in most neighborhoods

Nelda Scott Newton, vice president of Wells Fargo's Portland-based Real Estate Group, said the bank continues to loan on office, subdivisions, apartments, land, industrial and so forth.

She said the market is solid in Portland for office and industrial property. Both rents and occupancy rates have risen. For Class A office space, the vacancy rate is about 5.6 percent. The industrial vacancy rate is about 6.9 percent and dropping in the face of record leasing activity.

Downtown hasn't seen a new office tower since 2000, although that is about to change with a handful of new buildings in the early stages of construction and development.

"Only now are we really seeing vacancies low enough to justify new office," she said.

The same thing is true in the industrial sector, with the added benefit to owners that the market is severely constrained by the urban growth boundary.

The only real estate product that has really showed signs of slowing is residential land. With the pace of sales slowing, home builders aren't out buying up land for future development.

Mike Glanville, chairman and chief executive officer of Q10 National Mortgage, a Portland-based commercial lender, said that since his firm chiefly lends on behalf of 20 or so life insurance companies, it isn't dependent on the market for commercial mortgage-backed securities.

Glanville said his firm can lend on just about anything but condominiums, and offers loans for $1 million to $25 million. He said he hasn't seen an unusual number of commercial loans in trouble.

wculverwell@bizjournals.com | 503-219-3415

http://portland.bizjournals.com/portland/stories/2007/11/19/story12.html?t=printable

Leo

11-16-2007, 10:51 PM

Not about condos, but relevant to PDX real estate market:

"Pollock's Lake Oswego company, Buena Vista Custom Homes, built too many houses during the boom in towns from Scappoose to Happy Valley to Bend. Next month, Pollock will put all 230 of his unsold homes and condos up for a two-day auction. The asking prices have ranged from $300,000 to $650,000. The bids will start as low as $69,000. "

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1195183531138400.xml&coll=7&thispage=1

Once again, about 12-18 months behind San Diego, Miami, etc. My guess is that just like in those places, it will be another 6 months or so before we see "real" auctions. The first auctions in other cities have typically resulted in few sales because the winning bids failed to meet the developers' expectations. Only in the last few months have the expectations begun to be tempered...

MarkDaMan

11-16-2007, 11:58 PM

Leo

11-17-2007, 06:52 PM

except in Portland we are talking of the low thousands of extra units and in other parts of the country they are dealing with tens of thousands of housing units. I believe I read somewhere that Miami had 80,000 unoccupied units? I might be wrong on the city, but Portland's market isn't nearly as saturated as the others you mentioned.

Yes, the numbers are quite different. Places like Miami and San Diego have a much higher number of vacant units than Portland. Although these cities also have larger resident and tourist populations, so if you wanted to compare numbers, you'd need to normalize them to the populations first. Also, the number of vacant units in those cities did not become apparent (for some reason I don't understand - maybe some funny accounting in the RMLS system?) until well after the market decline began; possibly, Portland's vacant inventory is similarly understimated now.

The fact that Portland is behaving so similarly to those cities, albeit with a 12-18 month lag, leads me to expect that the normalized excess supply in Portland may be similar. After all, if the Portland oversupply relative to real demand was not similarly large, why would these auctions appear?

Leo

11-17-2007, 07:08 PM

While sale prices of U.S. homes fall, the Rose City's still rise

...

Home prices have dropped below 2006 levels in most U.S. metro areas this year, but Portland's median sale price for new and existing homes was up 6 percent from a year earlier. October's median price was $287,000, compared with $270,000 a year ago, according to a monthly survey by the Regional Multiple Listing Service, which lists most home sales in the region.

The price growth came despite a bloated inventory of unsold homes that would typically drive down prices. So far, sellers have refused to reduce their prices dramatically even though they have to wait nine weeks on average to sell. That wait is up by more than one-third from a year earlier.

"It defies explanation," Jerry Johnson, Portland housing economist, said of the market's strength.

I don't understand why a professional economist would say something like this. Even a casual observer knows that this situation (rising prices and falling sales) occurred in every other housing market before prices started to fall. To me, the simplest explanation is that the market is "sticky" (inefficient) and that there can be a significant time lag before prices adjust to demand.

In fact, Johnson himself later allows for this possibility:

Johnson, the housing economist, says Portland might not continue to show price growth through the end of 2007. The region's December 2006 median price was $273,500.

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1195273572305810.xml&coll=7

MarkDaMan

12-14-2007, 07:02 PM

The return of the renters: Upended housing market spurs Portland's apartment market
Portland Business Journal - by Wendy Culverwell Business Journal staff writer

The mortgage meltdown is good news for apartment owners.

Owners of multifamily buildings will benefit when former renters who overreached and face foreclosure return to the rental market. Grubb & Ellis, in its 2008 real estate forecast, notes that multifamily housing is the only commercial real estate sector to benefit from the housing slump because more people are renting.

Metro-wide, apartment vacancy rates stand at about 4.4 percent, down from 4.9 percent a year ago. Average rent has climbed to $781, up 5.7 percent in the past year.

The numbers are helped by a slowdown in new construction, with about 770 units expected to be constructed in the area this year, somewhat below the annual average of 1,000.

About 3 percent of the city's apartment inventory of roughly 250,000 units has been converted to condominiums in recent years, further dampening supply.

Jerry Johnson, a real estate consultant and principal with Johnson Gardner LLC, talks of one owner who plans to offer a "Welcome Back" package for former tenants facing foreclosure and returning to the rental market. His theory: They'll be solid renters for several years to come as they rebuild their credit.

Phil Oester, a multifamily broker with Hendricks & Partners, said mortgages with low interest rates and 100 percent financing took some of the most financially stable renters out of the market.

"Now they're back," he said.

The bigger impact will likely result from current tenants who might have become owners when mortgages were easier to come by. The days of easy mortgages are quickly drying up.

It's been a long wait for owners. Rising levels of homeownership helped push up vacancy rates and lowered rents.

Nationally, the rate of Americans who own their own homes climbed nearly three points to 68.2 percent in the past decade, according to U.S. Census data. In Portland, one percentage point equals about 7,000 households. A three point rise in homeownership here translates roughly to 21,000 fewer rental units.

That has a huge impact on a market this size, said Johnson.

Now, however, it's starting to correct.

According to Hendricks & Partners, the Portland apartment market is benefiting from the addition of 14,500 jobs in the past year along with a drop in home sales, as reflected by the rising inventory of unsold homes.

According to the Regional Multiple Listing Service, the number of closed sales fell more than 25 percent in October and pending sales were off by 22 percent. With 15,567 homes actively for sale in October, the inventory would satisfy demand for 8.4 months, up from 4.6 months in 2006.

Oester has noticed a surge in buyers for complexes built in the 1980s and 1990s. They're updating the interiors with new cabinets, counters and trim, raising rents and planning to sell in just two to five years.

"Most activity is in rehab," he said.

Joseph Chaplik and Bernard Gehret, partners in the multifamily brokerage Joseph Bernard Investment Real Estate, agree that apartments are attractive to buyers and to banks.

While bankers are sweating over bad mortgage loans, financial institutions continue to write loans on income-producing properties, such as apartments. Interest rates have even dropped in recent weeks, they said.

The reason: Good fundamentals and the rarity of foreclosures on multifamily properties.

According to LoopNet, the California-based real estate data service, the average price per apartment unit in the Portland area is up to $103,658, a 39 percent increase from just a year ago.

At the same time, eager buyers are accepting a lower return on their investments, anticipating a future rise in value. The average capitalization rate for apartment deals in the past year is about 6 percent, down from 6.3 percent a year ago.

wculverwell@bizjournals.com | 503-219-3415
http://portland.bizjournals.com/portland/stories/2007/12/17/story2.html?t=printable

MarkDaMan

12-21-2007, 04:14 PM

Ashforth Pacific buys a 'trophy' downtown
PacWest Center - The $309-a-square-foot sale continues the firm's recent westside purchases
Friday, December 21, 2007
RYAN FRANK
The Oregonian

Ashforth Pacific Inc. will close today on a $161.5 million purchase of the PacWest Center, a landmark downtown office tower and the city's third-tallest building.

Ashforth Pacific, Portland's biggest downtown office landlord, worked around the clock over three weeks to finish the purchase from Mitsubishi Estate Co. before Dec. 31, said Scott Langley, Ashforth Pacific's president.

The sale price comes out to $309 per square foot, the highest rate ever paid for a downtown Class A office tower.

Tokyo-based Mitsubishi had been the majority owner in the building since it rose in 1984. Ashforth Pacific's purchase signals that the firm, normally seen as a conservative player in Portland real estate, plans to continue its recent buying wave.

Ashforth Pacific has a near monopoly on Lloyd District properties. Since 2005, it has bought the ODS Tower near the Morrison Bridge and One Pacific Square in Old Town. Ashforth Pacific also has ventured outside Portland with purchases in Seattle and San Francisco.

Langley says the firm sees a bright future in the three cities. All three have vibrant downtowns with land-use policies and mass transit to support them. Their economies benefit from Pacific Rim trading and growing populations, especially from young people.

The numbers show there's a reason to be bullish on Portland's downtown office market. Class A vacancy rates are down to a tiny 4.8 percent, and Cushman & Wakefield predicts the market will get tighter in 2008.

The PacWest Center covers a full downtown block. Brokers call it a "trophy asset."

The futuristic design by the late Hugh Stubbins of Massachusetts and Skidmore, Owings & Merrill Architects has stood the test of time. The tower has a unique two-story atrium with its own mini-Main Street: a coffee shop, bank, barber, dry cleaner, convenience store and two restaurants.

The tower's exterior is glass and aluminum panels imported from Japan. Its two interlocking cubes increase the number of corner offices.

The Wall Street Journal in 1997 named the PacWest Center the best building in Portland, and it won building of the year three times from the Building Owners and Managers Association, according to Cushman & Wakefield, which has managed the building for Mitsubishi.

"It has all kinds of pedigree," Langley said.

Today, the building is a prize purchase for anyone who can afford nine figures.

It is 96 percent full, with an A-list of renters, including KeyBank, law firm Schwabe, Williams & Wyatt, Merrill Lynch and software company Oracle. And it's in a prime spot across the street from City Hall and the University Club, and just a few blocks from the federal and county courts.

Once transit mall construction is finished, the building will be sandwiched by the new downtown light-rail line, with stops on either side.

Mitsubishi Estate Co. began marketing the sale in September, said Gary Griff, a senior director at Cushman & Wakefield.

Griff shopped the building around to a limited group of buyers who could handle such a large purchase and could close by Dec. 31. Griff said Mitsubishi had owned the building since 1984, and it had come time to sell.

Langley and Ashforth raced to put their bid together and investigate the building so they could finish before Christmas week. "Frankly, people are running on adrenaline fumes," Langley said.

Ashforth Pacific, as a branch of Connecticut-based Ashforth Co., and its investment partner, GE Asset Management, have deep pockets. GE Asset Management, General Electric's pension fund manager, has more than $175 billion.

Griff and Jim Lewis, an associate at Cushman & Wakefield, represented the seller, formally known as 1200 Building Associates.

Langley expects to get the keys this morning.

Ryan Frank: 503-221-8519; ryanfrank@news.oregonian.com; blog.oregonlive.com/frontporch.
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1198212910138480.xml&coll=7

MarkDaMan

01-25-2008, 04:25 PM

Robust downtown attracts office investors, developers
Shorenstein buys Portland portfolio from Blackstone
Portland Business Journal - by Wendy Culverwell Business Journal staff writer

Two of Portland's biggest commercial office portfolios changed hands in 2007, a sign that investor interest in downtown surged in the past year.

In the spring, San Francisco-based Shorenstein Properties LLP acquired the former Portland holdings of Equity Office Properties Trust from The Blackstone Group LP, a massive private equity fund with assets approaching $100 billion.

Last February, Blackstone had purchased Chicago-based Equity, at the time the nation's largest office landlord, for $39 billion and then split the national portfolio.

The $1 billion Portland transaction made Shorenstein the Rose City's largest landlord with 47 properties and 4 million square feet in downtown and Kruse Way. Portland represents about 40 percent of the equity investment of Shorenstein's $1.1 billion Eight Fund, of which the Yale University Endowment is a leading investor.

Although Blackstone's tenure as a Portland owner was brief, the New York-based investor made a significant change that will affect tenants as they enter new leases or renew existing ones.

For leasing purposes, Blackstone "re-sized" local buildings, meaning tenants will pay for more square footage of common areas such as lobbies, hallways and restrooms, boosting their overall rent and, not coincidentally, the financial performance of the portfolio.

"The Blackstone Effect" will be most evident as tenants renew leases and find they are not only being asked to pay higher rents, but that their leases now include more square footage. Brokers say Blackstone's detail-oriented accounting suggests Wall Street thinking is permeating the commercial real estate market in Portland.

Shorenstein is proving to be an active member of the Portland community.

In September, it broke ground on First & Main, a 16-story office tower first proposed by its predecessor Equity.

The $150 million project will have underground parking, ground-level retail and 346,000 square feet of office space with individual floors that are an average of 20,000 square feet.

When it opens in early 2010, it will be the first significant new office building in downtown since Fox Tower opened in 2000.

The start of construction permanently ended speculation that the site could be developed as a new Multnomah County Courthouse. It had been the county's preferred location because of its proximity to other government bodies. Instead, the county and the Portland Development Commission have assembled financing to begin relocating nearby streets to clear a block at the Hawthorne bridgehead for the courthouse.

In another significant transaction, Gerding Edlen Development Co. sold three-fifths of its marquee development, the Brewery Blocks, for a cool $291.6 million. Two of the blocks were previously sold.

Institutional investors advised by JP Morgan Asset Management bought the three-blocks, which are home to Whole Foods, the M Financial office building and the Louisa apartments.

Mark Edlen, principal, said he wanted to keep the Brewery Blocks, but had to consider the needs of investors who supported transforming a former brewery into a mixed-use development.

As the minutes ticked off 2007, investors remained busy. Shortly before Christmas, Ashforth Pacific Inc. paid $161.5 million for Pacwest Center, or $309 per foot, the 30-story, 522,000-square-foot Class A office at 1211 S.W. Fifth Ave.

Dominant in the Lloyd District, Ashforth Pacific now owns 2 million square feet of office space in the Central Business District, making it the largest landlord in downtown.

While 2007 saw plenty of trophy-quality properties change hands, investors were also interested in Class B, C and historic buildings.

Patrick Callahan, who once led Northwest operations for Equity Office, formed Renaissance Group in Seattle. For its debut acquisition, Renaissance selected the Sherlock Building, a historic office at 320 S.W. Oak, for which it paid $9.75 million.

Unico Properties LLC, best know as the Seattle-based managing owner of U.S. Bancorp Tower, expanded its local portfolio when it bought the Commonwealth Building from the OCF Joseph E. Weston Public Foundation for $27 million.

Unico plans to spend another $6 million to update the hallmark building, 421 S.W. Sixth Ave., which was designed by Pietro Belluschi and was one of the first office structures constructed after World War II using modern techniques, including glass exteriors.

wculverwell@bizjournals.com | 503-219-3415
http://portland.bizjournals.com/portland/stories/2008/01/28/focus2.html?t=printable

MarkDaMan

02-14-2008, 03:10 AM

Housing's slide allows for apartment market's rise
Portland Business Journal - by Jon Bell Special to the Business Journal

If anyone's smiling at the way the housing market's gone of late, it may very well be apartment landlords.

Granted, slowing home sales and tightening credit haven't caused the same stir in the Portland area as they have across the country, but there's no denying that the brakes are on in the Rose City. As a result, fewer people are in any kind of hurry to buy homes.

Add in a steadily growing population -- fueled by an influx of 25- to 35-year olds -- a stalled condo market, a paucity of new apartment construction and renters who are content to sit tight, and it's no wonder that the apartment market is surfing along just fine in the wake of housing's slowdown. Rents and property values are up, renter discounts and vacancy rates are down, and the year ahead, while not entirely rosy, is looking to bring more of the same.

"Portland is a growing market," says Joseph Chaplik, co-owner of Joseph Bernard Investment Real Estate, a Portland commercial real estate firm. "We really haven't seen Portland [apartment building] owners raise rents significantly over the past decade, so I think it's been coming. Portland's been a really inexpensive West Coast city, but it's having a good boom."

According to Mark Barry, principal of the apartment appraisal firm Mark D. Barry & Associates, turnover rent rates -- those set for a unit when a tenant moves out -- rose 5 to 10 percent in 2007. Overall rates -- those imposed on an entire building -- rose roughly 2 to 3 percent.

What's driving the increases?

For starters, apartment vacancies in the greater Portland area are down to 2.9 percent, the lowest in 15 years. Two years ago, they were at nearly 6 percent.

Much of that has to do with the fact that not as many people are buying homes as they were a few years ago. The U.S. Census Bureau says that the national homeownership rate dropped from 69 percent in the third quarter of 2006 to 68 percent in the same quarter in 2007. In the West, it dropped from a little more than 65 percent in the third quarter of 2006 to 63.5 percent in 2007.

The crumbling subprime lending market is to blame for some of that, but Portland's relatively expensive home prices also have kept some prospective buyers wearing renters' shoes.

"A 2 percent change [in homeownership rate] can result in a lot more renters," says Barry. "And with subprime lending heading south, tougher underwriting and the expense of homes, people are taking more of a wait-and-see attitude to home buying. All of those reasons have resulted in pretty good demand for apartments."

Also, there's been very little significant apartment construction in the metro area for some time.

Barry says just 1,500 building permits were issued for new apartments in 2007, one of the slowest years in the recent past.

And out in the suburbs, homebuilders have snatched up most of the expensive land that could be used for new apartments.

"The apartment guys ... can't even compete for that ground anymore," says Kirk Taylor, a veteran apartment broker executive with CB Richard Ellis in Portland.

Another factor that has helped lead to higher rents is the sprucing up of some formerly rough urban neighborhoods. Nicer, cleaner apartments in nicer, cleaner neighborhoods mean landlords can charge more.

"That's definitely another part of it," Chaplik says.

Besides pushing rents up, the changing market is allowing landlords to essentially do away with discounts, incentives and lax restrictions. With less pressure to fill their buildings, landlords are also finding themselves freer to employ bill-back systems, whereby they charge residents for a percentage of a building's utilities, usually water and sewer.

The recent market trends have not only driven up rental rates, but property values for apartment buildings as well.

According to Barry apartment values were up by 4 to 6 percent. The median per-unit sales price for apartment units in 2007 was $70,000, up from $66,400 in 2006. And, total apartment sales rung in at $950 million for 2007, nearly $100 million more than in 2006.

"There's more money being thrown at me than we can place," says CB's Taylor, noting that many apartment complexes for sale receive 10 to 12 offers, and some as many as 18.

Many of those making the offers want to boost the size of their portfolios.

"A lot of investors are trying to capture a lot more units," Chaplik says.

But not everything is shaping up to be hunky-dory for the apartment market in 2008. Taylor worries that eventually there could be overbuilding in the apartment space, and Barry is concerned that the economy, especially in light of a weak finish to 2007, could put a damper on the good fortune that's shone on the apartment market over the past year.

"There are a lot of signs that the economy is heading south," Barry says, "and I think that's what people are a little nervous about. '07 was a very good year for landlords, but my sense is that '08 is not going to be quite as good."

portland@bizjournals.com | 503-274-8733
http://portland.bizjournals.com/portland/stories/2008/02/11/focus6.html?t=printable

MarkDaMan

02-26-2008, 09:49 PM

this is somewhat enjoyable...

Sub-prime loans take toll on Kruse Way
Suburban offices see vacancy rates climb in ’08, industry experts say
Daily Journal of Commerce
POSTED: 06:00 AM PST Tuesday, February 26, 2008
BY TYLER GRAF

Portland’s office market is at a conflicting confluence: On the one hand, the downtown market is booming and is set to perform even better in the coming years. On the other hand, the suburban market has hit a slump, with vacancy rates rising along traditionally strong Kruse Way.

Once considered a major player in the office-market game, suburban offices are seeing increases to their vacancy rates in 2008, according to real estate professionals working along the corridor.

The reasons for the precipitous shift are debatable, but industry professionals point to the sub-prime meltdown as the primary culprit. It’s forced many mortgage companies – a big presence on Kruse Way – to move away.

It’s a sign that the corridor was relying too heavily on one industry, whose practices were economically unsustainable, said Steve Reaume, a 13-year real estate professional currently with Pacific Real Estate Partners.

“Kruse Way is still golden, but it got too top heavy with these mortgage companies,” Reaume said, adding that the market started getting glutted by mortgage companies three years ago, when Kruse Way was viewed as an atypically strong market. “And everyone in the business knew it was getting too top heavy.”

Mark McFarland, also of Pacific Real Estate, agrees with Reaume’s assessment but says that within eight to nine months the market should correct itself, as investors become less cautious about where the market is headed.

Rents along the corridor have also increased, despite the mortgage-company exodus, due to offices being bought and flipped by investment firms.

Early last year, private equity firm the Blackstone Group purchased 1.6 million square feet of office space from Equity Office Properties Trust in the hopes of making superficial improvements to the properties over a short period of time, then selling at a higher value – the common act of “flipping.”

In a two-month time period, the Blackstone Group resized the properties, increasing lobby space and widening hallways. This effectively forced some tenants out of their space and drove up rental rates.

The situation in the Kruse Way area runs counter to what’s happening downtown, where the lack of vacant space – currently hovering around 5 percent – has caught the attention of some real estate professionals. As a result of near-capacity Class A office buildings, less desirable Class B offices within the city are starting to demand higher rates as well, Greg LeBlanc, a real estate analyst at Portland State University, writes in his department’s quarterly report. In the fourth quarter of 2007, rents for Class B offices jumped 9 percent, to $21.16.

“It’s still sort of a soft market – a landlord market,” Pacific’s McFarland said. “But we’re still signing leases (along Kruse Way) with some of the highest rents available.”

For Kruse Way, however, Reaume sees it more as office-market triage: Space sits dead for a while, in part due to the sub-prime fallout, but this gives other companies an opportunity to move there. By the end of the year, he expects the market to have corrected itself.

“These companies have left,” Reaume said, “but other companies will take up the space in the future.”
http://www.djcoregon.com/articleDetail.htm/2008/02/26/Subprime-loans-take-toll-on-Kruse-Way-Suburban-offices-see-vacancy-rates-climb-in-08-industry-expert

Sekkle

02-26-2008, 09:58 PM

That's where I work, unfortunately (no, I don't work for a mortgage company). It would be much more convenient for me to work downtown - then I could just take MAX. Maybe in a few months...

Okstate

02-27-2008, 12:52 AM

I've never understood the big deal about Kruse Way. From Microsoft live maps (birds eye view) there doesn't seem to be a HUGE amount of buildings in the area. Maybe i'm just comparing it to other suburban office parks that are really big.. DTC (Denver) & Corporate Woods (Kansas City).

MarkDaMan

02-27-2008, 04:59 AM

^Kruse Way is a road full of sprawl. It isn't an office park, which makes it even more pathetic. It's just suburban sprawl.

The draw is that each building is hidden in the trees and hills. I have been in some of the offices and they are absolutely gorgeous inside with breathtaking views.

zilfondel

02-28-2008, 11:55 PM

So I thought this was funny:

American businessman buys $18m downtown condo

Bruce Constantineau, Vancouver Sun
Published: Tuesday, October 23, 2007
http://www.canada.com/vancouversun/news/story.html?id=8d45c3d2-d3be-4f8b-a978-e2bfc769f1af&k=70550

VANCOUVER - An unnamed Portland, Ore. businessman has paid a record $18 million for a 48th-floor penthouse suite in downtown Vancouver.

The 7,400-square-foot unit in the Private Residences at Hotel Georgia won't be ready for occupancy until 2011, when the $400-million development near Georgia and Howe is completed.

Sotheby's International Realty Canada president Ross McCredie said the buyer wants to remain anonymous, but the Vancouver property will be one of several he owns throughout the world.

"It's not the first time he's bought a penthouse suite in a big city," he said.

http://forum.skyscraperpage.com/showpost.php?p=3123500&postcount=19

Sekkle

02-29-2008, 12:06 AM

An unnamed Portland, Ore. businessman has paid a record $18 million for a 48th-floor penthouse suite in downtown Vancouver.

It was me. But keep that on the DL. :D

Sekkle

02-29-2008, 12:27 AM

^ :hahano:
Do you ever say or write something that you think is semi-funny, but then you think about it and it’s not really that amusing at all, it’s just an obvious thing to say and you feel a little like an idiot for having said it? Yeah, I’ve been doing that shit a lot lately.

sopdx

02-29-2008, 12:55 AM

Your photo tours always redeem you.

Since when is Vancouver BC a big city?

cab

02-29-2008, 01:06 AM

When Phil Knight said it was.

Okstate

02-29-2008, 03:10 AM

^ ForAteOh, if it makes you feel any better i feel stupid every time i post.

bvpcvm

02-29-2008, 03:51 AM

so many comments of mine go unposted... which would be to the great relief of many, if only they knew.

MarkDaMan

02-29-2008, 04:18 AM

^y'all sound like a bunch of women :)...nobody here cares if your post is lame...damn, if I worried about BS posts I'd never had made it to almost 5,000 posts. Stupid shit is said all the time...it is posting when drinking that I worry about. Going back the next morning like, 'oh hell Mark, what did you blog last night'.

If more peeps here just posted what was on their mind, I think we'd have a more vibrant community. It seems like everyone needs to talk twice as much to keep these threads lively in this new format.

Okstate

02-29-2008, 05:08 AM

:cheers: Lets all drink & blog like Mark!

PacificNW

02-29-2008, 05:12 AM

⇑ I relate...:banana: :banana:

joeplayer1989

02-29-2008, 07:39 AM

im probably the worst poster

cturner144

02-29-2008, 05:03 PM

Oh my god. It seems that the NYTs has an article a week about us! One goofy comment was “If you want to be on the Westside, your price range will start a little higher and you’re going the have trees and bigger lots.” The last time I looked the Eastside had trees as well.

The NYTs calls to interview me and a 25 minute conversation gets condensed down to a quote (complete with a typo in the print version). The context was skewed as what I was referring to was the likes of Forest Park. Mt. Tabor may be the east side version but nothing like the size of FP. Oh well.

Charles Turner
Goofy Commenter and Realtor for Prudential NW Properties

Leo

03-25-2008, 06:48 PM

Case-Shiller Index for January is out.

Looks like it’s beginning, albeit in a small way. Year-over-year, Portland prices were down 0.5% (Seattle prices were down 1.3%):
http://money.cnn.com/2008/03/25/real_estate/case_shiller/index.htm?cnn=yes

The trend graphs focusing on Portland and Seattle can be found here:
http://portlandrealestateoutsider.blogspot.com/2008/03/portland-existing-home-prices-drop-in.html

The beginning of the Portland bubble lagged about 12-18 months behind other cities in the index, and the Portland peak, as well as this first dip into negative YOY price changes, is consistent with this time shift. It’s good to know that the law of supply and demand has not been suspended. :)

Of course, price/income and price/rent ratios differ for each of the cities on the Case-Shiller list, so I would expect the details to differ. But I would expect price/income and price/rent ratios to overcorrect by a similar amount in all cities and then return to each city’s individual historical baseline over a medium time period. Details notwithstanding, I think this is a significant milestone in the Portland real estate market’s evolution.

Leo

03-26-2008, 11:14 PM

More Portland-centric information in today’s Oregonian, though not much about condo towers …

“The Portland area, once a star performer in an otherwise gloomy U.S. housing market, crossed into the same dismal territory in January when home values dropped for the first time since record-keeping began in 1987, according to a report released Tuesday.

The Standard & Poor's Case-Shiller report comes amid warnings from a respected economic consulting firm that home values could fall as much as 15 percent in Portland, Salem and Eugene and up to 25 percent in resort or retirement communities on the coast and in Bend, Hood River and southern Oregon.”

http://www.oregonlive.com/business/oregonian/index.ssf?/base/news/1206503708239240.xml&coll=7

They’re being a little overly dramatic by saying that Portland “crossed into the same dismal territory”. After all, Portland’s 0.5% decline is still small compared to Phoenix and Miami’s 20% decline, although in the beginning, Phoenix and Miami’s declines were small, too. And the monthly decline is rather steep, with an overall 4% drop from the peak. First year-over-year decline in 20 years is significant, even if it is small …

Leo

05-01-2008, 11:05 PM

“The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That's the biggest fall since the index began tracking prices in 2000.

“The 10-city Case/Shiller index is down 13.6% year-over-year, the biggest drop since its launch in 1987.

“Prices in the Las Vegas metro area have plunged more than any other city, down 22.8% over the 12 months through February. Miami prices plummeted 21.7%. In Phoenix, they've fallen 20.8%.

“Other metro areas recorded only modest price declines, including Portland, Ore., down 2.0%, Seattle, off 2.7% and Dallas, 4.1%. In the nation's largest city, New York, metro area prices dropped a modest 6.6%. “

http://money.cnn.com/2008/04/29/real_estate/housing_price_fall_deepens/index.htm?postversion=2008042914

2% annual depreciation is still “less bad” than Las Vegas, Miami, and Phoenix, although past descriptions of the PDX market as “robust” or “supported by strong fundamentals” were clearly misguided. The unrealistic hope that appreciation would simply return to historical values and that depreciation could never happen in PDX due to the UGB, population growth, baby boomers, retirees, etc. is clearly debunked.

Some interesting graphs are linked below.

PDX appreciation has dropped every single month since April 2006, although it has crossed into negative territory (depreciation) only since January:
http://bp0.blogger.com/_1J3jBnbSjmU/SBcxenPh9aI/AAAAAAAAAF0/AbkkVH_3y0A/s1600-h/CS_PDX_Median_Apr2908.jpg

PDX median price has fallen back to the June 2006 value:
http://bp1.blogger.com/_1J3jBnbSjmU/SBc2U3Ph9dI/AAAAAAAAAGM/PGErsjATzVk/s1600-h/CS_PDX_Price_Apr2908.jpg
(This graph really demonstrates how wildly PDX has deviated from its historical baseline)

The shape of the PDX appreciation trend looks almost hairsplittingly identical to the trend of the SF Bay Area, except that it occurs later. It looks like the multitude of differences between the SF Bay Area and PDX doesn’t really cause their real estate markets to behave differently:
http://bp0.blogger.com/_1J3jBnbSjmU/SBc2UnPh9bI/AAAAAAAAAF8/pDQk-vEuigs/s1600-h/CS_PDX_20city_Apr2908.jpg
Particularly interesting is the “kink” in the trend for both cities (around Sep07 in SF and around Dec07 in PDX) at which depreciation accelerated rather sharply in both cities.

Leo

05-16-2008, 09:40 PM

“The Portland area saw its median home price drop 3.5 percent in April compared with April 2007 -- the biggest such decline since at least 2001.

…

“Portland's home prices have followed a weakening trend since peaking last August at $302,000. Since that peak, the region's median has fallen 9 percent.

…

“The Portland area saw the number of closed sales fall 39 percent in April, compared with the same month in 2007.”

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/121091010748010.xml&coll=7

MarkDaMan

05-16-2008, 11:09 PM

^There was some positive news in the article too. Would be nice if people who post articles, post the whole thing. Then highlight the parts they think are significant. Just a thought, seems like you never miss a beat when it comes to negative housing news???

like this:

Portland-area median home price down 3.5 percent
April's year-over-year decline is the area's first in the current housing slowdown and the biggest since 2001
Friday, May 16, 2008
RYAN FRANK
The Oregonian

With buyers still wary, the Portland area saw its median home price drop 3.5 percent in April compared with April 2007 -- the biggest such decline since at least 2001.

The median price for new and existing homes was $275,000 in April, compared with $285,000 a year earlier, according to the monthly report published by the Regional Multiple Listing Service. The year-over-year decline was the first reported by the listing service in the current housing slowdown.

"That's not startling or surprising," said Jerry Johnson, a Portland housing economist. "That's not a disaster scenario, but it's not good."

Portland's home prices have followed a weakening trend since peaking last August at $302,000. Since that peak, the region's median has fallen 9 percent.

Even so, Portland, Seattle and Charlotte, N.C., remain hubs of the country's strongest real estate markets. Portland's mild troubles are nothing compared with painful housing downturns rolling through parts of Arizona, California, Florida and Michigan.

The Portland area saw the number of closed sales fall 39 percent in April, compared with the same month in 2007. The inventory of unsold homes rose -- typical for the season -- to 10 months for Clackamas, Columbia, Multnomah, Washington and Yamhill counties.

One bright spot: The spring buying season brought an increase in pending sales for the fourth straight month -- a potential signal of the market's future heading.

The housing market continues to be worse in Clark County. The once-fast-growing county suffers from an oversupply of new homes. Clark County home prices fell 5.7 percent in April to $250,000, down from $265,000 last April. The inventory of unsold homes was 12 months.

Declining prices don't mean much to homeowners who have no plans of selling or who bought years ago and have built thousands of dollars in equity. The people who are in most financial danger bought homes during the market's peak years of 2006 or 2007 with little or no down payment.

On the other hand, the continued slowdown provides opportunities. Johnson said he's hearing from out-of-town investors looking for deals. "Market adjustments are great buying opportunities if you happen to be in the position to buy," Johnson said.

But a lack of buyers across the market is part of the problem, said Kathy MacNaughton, a principal broker at Realty Trust in Portland.

MacNaughton cited three factors dampening buyers' enthusiasm:

Buyers find themselves ineligible for mortgages under lenders' new tighter credit and income standards.

They worry that prices will continue to fall.

They fear they won't be able to sell their current homes.

"This has really become apparent in the last 60 days," MacNaughton said. "There's not enough buyers out there."

To read the report, visit blog.oregonlive.com/frontporch. Ryan Frank: 503-221-8519; ryanfrank@news.oregonian.com.
http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/121091010748010.xml&coll=7

Leo

05-17-2008, 03:37 AM

Leo

05-28-2008, 10:55 PM

http://blog.oregonlive.com/frontporch/2008/05/pdx_prices_fall_again_still_no.html

“Portland-area home prices dipped further in March, registering a 4 percent year-over-year decline, according in to the Case-Shiller index.”

The price drops are clearly accelerating:
Jan 2008: -0.5%
Feb 2008: -2.0%
Mar 2008: -4.0%

Surprisingly, this is pretty consistent with the RLMS decline reported for April. I say “surprisingly” because the Case-Shiller Index uses a much more rigorous data set than RLMS. But then again, the C-S number is for March, while the RLMS number is for April.

“That said, the Portland region continues to outperform the rest of the country. Of the 20 biggest metro markets, Portland had the third-best performance.”

“Third-best” is spinning data just a little too hard for my taste. “Third least bad” would be more sensible. If your salary was cut by 4%, you wouldn’t walk around bragging that you got the third-best raise.

“The Case-Shiller index for Portland peaked in July 2007 and home prices are already down 6.5 percent from that level. (The Case-Shiller figures are an index based on 2000 prices. So the index doesn't really compare to actual prices.”

The last sentence is a bit misleading. The Case-shiller index is not BASED on 2000 prices; it is normalized so that the index is set to 100 for the year 2000. It certainly does “compare to” actual prices.

Here is an interesting graph showing the similarity between the downward trend for Portland vs. the SF Bay area and the 20-city index:
http://bp2.blogger.com/_1J3jBnbSjmU/SDxJ8w9BysI/AAAAAAAAAHc/iH9iVqGgjlk/s1600-h/4City_Price_Growth_CS_March08.jpg

The complete Case-Shiller report can be found here:
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_052703.pdf

And the actual data can be downloaded here:
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html

PacificNW

05-29-2008, 12:28 AM

⇑ :koko:

Castillonis

05-29-2008, 01:17 AM

Who are the targeted audiences for the abundance of condos that will soon be available. You may not appreciate this if 1. you are busy doing well financially 2. your compensation is at stake 3. or you live under a rock and don't read newspapers or have contact with multiple groups of people :) When I worked as a consultant in the Bay my coworkers would inquire if I had purchased a home in the area yet. I rented a second place and lived there during the week and would fly home for the weekends. Inside I would laugh and think about how out of touch they were. At that time a two to three bedroom home in outlying areas would cost you around 800k (unless you were willing to move to a bad neighborhood) You could buy an older condo in San Jose for about 500k or a newer condo in Los Gatos for about 750k. I would politely respond no, and engage them in some other topic because I didn't want to open Pandora's box. It wouldn't be professional. When I spoke with other consultants who were green, they thought I was crazy if I pursued work that possibly compensated less in exchange for potential less risk.

Condos
The sales people will know who are the current best target groups. Warmer climates such as Arizona and Palm Desert are seeing more Canadians as their currency continues to grow relative to the dollar. (Relatives involved in sales process) Older couples with children in Portland might buy an additional home to spend time with their family during the summer months. A cash investor from LA or New York may buy a unit as an investment, but they may be more interested in purchasing homes from individuals.

Apartments
You can sell the building to a real estate investor in a market that is accustomed to successfully fetching higher rents such as the Bay area in California. People who have substantial income, but are wary of purchasing due to an expected short stay or fickle employment may commit to a higher priced rental.
It is much easier to hold on to a lease that was too much of a commitment if you know that it will only be for a year.

Which target audience next and where next
Individual Europeans or Asians that are more affluent may start to see real estate as a real bargain second or third home. How many of those people are out there even if you actively market to them. I don't think you will see much price elasticity below $1000 per mos in the future. People will slowly change their expectations once they use up their available credit and become fully encumbered. The dollar is continuing to decline as long as we continue the current fiscal path. Credit will become more expensive. Who knows what will happen to fuel costs. If you look at supply chains you know that everything is very dependent upon fuel costs and transportation. Companies are not continuing to absorb those costs.

Early 2000s set us up for a harder fall
I think that current developers and investors will divest if it is painless or continue in the same manner until they feel some significant pain and some reap failure. Any changes they make will probably not be enough until it is too late. Investment banks, mortgage brokers, central bank board members, and others in the chain of fees for service without liability or accountability hung themselves without enough regulation and lowering of interest rates that further set the market up for where it is now. Portland definately did not see the speculation that Florida, NY, saw. I feel that their wealth creation is our encumberance. Housing is one of the biggest items you pay for unless you have been sitting in your abode since 1993.

MarkDaMan

05-29-2008, 05:57 PM

Leo, post the story...then tear it apart later in the post or in another post after. Posting a link and then ripping into something both leaves the rest of us without the context of what the heck you are talking about, it also shows that there is some bias on your end to see the market tank being you again select the pieces that are of interest to you, usually pieced together to show a 'dire' housing situation. I'm all for you stating your opinions, and pulling the 'facts' together to suit your point, but not posting the story is weird.

PDX prices fall again; still No. 3
Posted by Ryan Frank, The Oregonian May 27, 2008 07:37AM
Categories: Housing economy

Portland-area home prices dipped further in March, registering a 4 percent year-over-year decline, according in to the Case-Shiller index.

That said, the Portland region continues to outperform the rest of the country. Of the 20 biggest metro markets, Portland had the third-best performance. Somehow, Charlotte remained in the black with a .8 percent increase. Dallas saw a bit of price growth from February to March and surpassed Portland for the No. 2 position. Seattle trails Portland at 4.4 percent.

For Portland, the index brings more of the same. Both the local RMLS stats and the Case-Shiller index have been showing the same trends since late last summer. Prices have been consistently edging down since about August. In April, the RMLS report for new and existing homes showed a 3.5 percent year-over-year decline. Who knows where it will end up but my guess based on talking to people in the industry would be between 7 and 10 percent sometime this summer.

Nationally, the market still stinks. The national index for the first quarter and the 10-city and 20-city composites all set new records for 20-year-old index. The national index is off 14 percent in the first quarter of 2008 compared to the same period in 2007. During the 1990-91 housing recession, the national index bottomed out with a 2.8 percent annual decline.

Six of the 20 biggest markets are reporting at least a 20 percent year-over-year decline. The worst markets: Las Vegas (25.9 percent), Miami (24.6) and Phoenix (23). You'll notice that all three of those markets were speculators markets during the boom. The Rust Belt cities with the deep economic problems aren't as bad off. Detroit is down a lot but still just 18 percent.

UPDATE: I didn't have access to the historical figures from home when I wrote this morning. So here's another number to chew on: The Portland region is already 6.5 percent off its peak. The Case-Shiller index for Portland peaked in July 2007 and home prices are already down 6.5 percent from that level. (The Case-Shiller figures are an index based on 2000 prices. So the index doesn't really compare to actual prices. In March, the index was at 174.39. That's 74 percent above the 2000 baseline of 100 but 6.5 percent below the peak of 186.51)

The RMLS figures show the region is down 9 percent to $275,000 from the August 2007 peak of $302,000.

Sammy14: I'm not saying Portland didn't have speculators in the single-family or condo markets. Clearly, there were speculators in both. You're right, the condo market here got hit hard with investors and speculators. Some of those guys are now paying the price for mistiming the market. But what I'm saying is that the speculators in those Sun Belt markets were a bigger factor in driving up pricing than they were here. I could be proven wrong by the time this thing is over. The bigger issue here seems to be builders who forgot the market fundamentals and tried to build more housing than the market could support. (See Happy Valley and Clark County.) Those are huge factors in the oversupply in both places.

Sammy14: Sure, there were too many condos built for the market demand. Yes, some of that supply came because the PDC subsidized it. And yes, many of the downtown condos were built by Homer Williams or Mark Edlen. Outside of those deals, there was fraud and crazy financing. Yes, prices rose higher than underlying incomes could support.

I'd agree that the problem also involves price. But it's all connected. I've been covering real estate now for nine months. I started just as the mortgage market fell apart in August. But from what I've learned in just nine months, Portland's troubles boil down to this:

Builders saw bottomless demand from buyers and continued to build even as the market weakened starting in 2006. When the mortgage market stalled, it zapped the investors and the marginal borrowers out of the market. That left the builders and market will more condos and single family homes than the demand could support. The result: We're stuck with 10 months of inventory and slow sales rates. That oversupply has and will continue to drive down pricing.
http://blog.oregonlive.com/frontporch/2008/05/pdx_prices_fall_again_still_no.html

Leo

06-02-2008, 09:35 PM

I’m going to be “weird” again and post a partial article. (The full article is four pages long, and you can find the link at the bottom). There are some sales stats on some of our favorite towers in the article, as well as some interesting facts about loans to the developers, but their accuracy may be suspect, since the article mentions Eliot Tower as being under construction.

The John Ross condominiums have sweeping views, an elegant shape that inspires architectural envy, and a whole lot of unsold units.

To date, just 177 of its 303 units have attracted buyers.

According to Multnomah County property records, a database that includes sale dates along with information about the property, buyers and prices, just two units have sold in 2008.

Public records portray the John Ross as a building that opened in a market flush with buyers, but which faltered in mid-2007 as newer buildings opened and the market slowed amidst housing concerns triggered by the subprime mortgage crisis.

It offers a telling example of why condominium developers are waiting for the market to improve before launching new projects, a situation that, ironically, could turn into a condo shortage in two to three years.

According to the Regional Multiple Listing Service, which tallies most though not all residential sales, there have been just 138 new units sold in the downtown area so far this year, far off the pace that led to a record 809 new condo sales in 2007. RMLS says 1,951 condos of all ages sold in 2007. In 2008, the figure is just 405.

At the John Ross, sales peaked at 40 in April 2007 and fell quickly to zero by November, according to county records.

Today, Portland has about 2,500 unsold condominiums, a figure that includes developers' inventories and another 1,000 "phantom units," which refers to condominiums bought by investors who intended to turn a quick profit and who apparently are holding out for the market to return.

Assuming Portland buyers have an appetite for 700 to 1,000 units a year, it will take nearly three years to clear out the current inventory.

The city of Miami, the poster city for condo development, has more than 25,000 unsold units, a six-year supply, according to its own Multiple Listing Service figures.

http://www.bizjournals.com/portland/stories/2008/06/02/story1.html?b=1212379200%5E1643110&page=1

bvpcvm

06-03-2008, 02:26 AM

It offers a telling example of why condominium developers are waiting for the market to improve before launching new projects, a situation that, ironically, could turn into a condo shortage in two to three years.

a condo shortage.

that's interesting.

MarkDaMan

06-03-2008, 03:46 AM

Condo pipeline dries up
Lack of sales this year could translate to a shortage in two to three years

The John Ross condominiums have sweeping views, an elegant shape that inspires architectural envy, and a whole lot of unsold units.

To date, just 177 of its 303 units have attracted buyers.

According to Multnomah County property records, a database that includes sale dates along with information about the property, buyers and prices, just two units have sold in 2008.

Public records portray the John Ross as a building that opened in a market flush with buyers, but which faltered in mid-2007 as newer buildings opened and the market slowed amidst housing concerns triggered by the subprime mortgage crisis.

It offers a telling example of why condominium developers are waiting for the market to improve before launching new projects, a situation that, ironically, could turn into a condo shortage in two to three years.

According to the Regional Multiple Listing Service, which tallies most though not all residential sales, there have been just 138 new units sold in the downtown area so far this year, far off the pace that led to a record 809 new condo sales in 2007. RMLS says 1,951 condos of all ages sold in 2007. In 2008, the figure is just 405.

At the John Ross, sales peaked at 40 in April 2007 and fell quickly to zero by November, according to county records.

Today, Portland has about 2,500 unsold condominiums, a figure that includes developers' inventories and another 1,000 "phantom units," which refers to condominiums bought by investors who intended to turn a quick profit and who apparently are holding out for the market to return.

Assuming Portland buyers have an appetite for 700 to 1,000 units a year, it will take nearly three years to clear out the current inventory.

The city of Miami, the poster city for condo development, has more than 25,000 unsold units, a six-year supply, according to its own Multiple Listing Service figures.

In Portland, developers haven't been quite so prodigal; since 2003, the city has added approximately 5,700 new condominiums in the area that includes the Pearl District, South Waterfront, RiverPlace and downtown Portland. Developers were attracted by the city's seemingly bottomless appetite for condos and buyers who didn't disappear as the average price rose from $203 per square foot to $378.

Even now, some Pearl District buildings have prices well above $500 a square foot.

Today, the pipeline is still turning out new projects, but all broke ground in better times. They include the Cyan, a 330-unit Gerding Edlen project near Portland State University; Eliot Tower, a 232-unit project in downtown; the 937, a Pearl District project with 114 units; and Waterfront Pearl, a riverfront project with 196 units, to name some of the larger buildings in construction.

Hundreds more are off the market in buildings that have been converted to apartments.

Since it takes about two years to construct a new project, brave souls might even consider launching a new one today. But don't count on it. With unsold inventories and hundreds of millions of dollars of outstanding construction loans to repay, condo developers aren't advancing any known new projects.

"It's almost the perfect time to start a condo project," jokes Mark Edlen, principal of Gerding Edlen, which has sold nearly 500 condominiums at the South Waterfront but, on slow sales, opted to open its newest building, the "3720," as apartments instead.

It is selling an equity stake in 3720 for $145 million to institutional investors advised by Kennedy Associates Real Estate Counsel LP. Gerding Edlen previously borrowed $113 million from Corus Bank to construct the project, a note that wasn't due for more than a year.

With apartment vacancy rates below 4 percent, Edlen said it's a great time to be in the apartment business.

In contrast, the snail's pace level of condo sales has sent developers back to their banks to renegotiate construction loans, including Gerding Edlen.

To construct the John Ross and Atwater Place, the well-regarded Portland developer took construction loans from JP Morgan Chase Bank: $93.6 million for John Ross and $91.17 million for Atwater Place. The John Ross loan was initially due on Aug. 22, 2008. That's been extended, Edlen said. The Atwater Place loan is due next spring.

Not everyone has the ability to renegotiate loans. Gene Grant, a real estate attorney with Davis Wright Tremaine LLP, said foreclosures are inevitable. Given that, he's not expecting new construction soon.

"It's grim," he said.

Not surprisingly, one local lender said it isn't writing any new condo loans.

"My very best customers wouldn't ask me. That's why they're our very best customers. They don't sell ice to Eskimos," said Nelda Scott Newton, vice president for Wells Fargo Real Estate Group, which provides construction loans for commercial projects, including condominiums.

Wells Fargo money financed construction of the Encore, a 177-unit building in the Pearl District that began selling units in January 2007, and Hoyt Street Realty's Metropolitan, a 133-unit tower that began recording sales last September. Wells Fargo, which said it has not foreclosed on any projects, loaned $88.8 million for the Encore and $84.78 million for the Metropolitan, according to loan documents filed with the Multnomah County Assessor.

Newton discounts one speculative estimate that Portland has more than 7,500 units in inventory and will take a decade to clear out.

"We probably have about a two-year supply in the downtown area," said Newton, who said barring an economic collapse, Portland continues to attract newcomers and will need to keep adding new housing in the future.

Edlen said it will take more than the promise of good timing to lure developers and their bankers back. Still, he's encouraged that units are selling, though at a slower pace than hoped for.

The Civic, a West Burnside building, has fewer than 10 units left for sale and Gerding Edlen's new Cyan project at Portland State University has attracted more than 1,500 visitors to its sales center, exceeding expectations, he said.

Wells Fargo's Newton said when the market comes back, some of the buildings that opened as apartments may convert back to condominiums.

Like the 3720, Ladd Tower and the Wyatt launched as condominium projects but converted to apartments.

Ladd Tower, a 220-unit tower the heart of downtown Portland, is being developed by Opus Northwest, which responded to the softening market by scrapping its original plans. It drew up a new project with high-end features packed into smaller, apartment-scale units.

The 245 units in the Pearl District's Wyatt, from developer Bob Ball, were actively marketed to buyers. In the end, Ball and his partners sold the building to an apartment operator.

"That's three towers that if the market were just screaming for condos, somebody could find a way to convert them back," Newton said.

Brian Owendoff, newly appointed vice president and general manager of Opus Northwest's Portland office, believes it will take until 2011 to clear out inventories and usher in a new builder's market.

"That's when people will probably start dusting off their plans," he said.

wculverwell@bizjournals.com | 503-219-3415
http://portland.bizjournals.com/portland/stories/2008/06/02/story1.html?t=printable

MarkDaMan

06-03-2008, 04:03 AM

I think there is good and bad in that article.

Just got a notice this weekend my rent is going up July 1. Seems like everything in the grocery store is 10 to 15 cents more per item. I noticed gas jumped from $3.99 to $4.05 from the time I went past this morning to the time my boss drove me home nine hours later. Spring has been sporadic and I'm using more electricity (heat turned up on June 2!) this year than last. Cable/internet bill is up, TriMet costs are going up, airplane tickets for my summer travel are ridiculously up...

So...I've stopped putting money into my condo down payment fund to pay all these additional costs. Guess if someone has some extra money laying around and wants to help me get to my goal, I'll gladly accept and do my part to take one of those suckers off the market :)

zilfondel

06-03-2008, 06:24 AM

u actually turned your heat on? you're kidding...

sweater?

Leo

06-03-2008, 06:10 PM

a condo shortage.

that's interesting.

No one ever said delusions couldn't be interesting ... :)

Leo

06-07-2008, 09:13 PM

I'm always surprised to see how close to the cliff these kind of companies like to run. It doesn't seem like a million dollars should be a big deal for an outfit the size of Legend Homes. They must have really squandered their profits during the boom years and leveraged themselves to the hilt ...

Oregon's Legend Homes can't pay its bills
After sales slump, the Tualatin-based company's main lender pulls the plug
Wednesday, June 04, 2008
RYAN FRANK
The Oregonian Staff

Legend Homes Corp., one of Oregon's oldest and biggest homebuilders, has survived three recessions with a reputation for paying subcontractors on schedule on the 10th day of each month.
But Tualatin-based Legend last month stopped paying about 60 subcontractors after its biggest lender, KeyBank, cut off funding. Legend's outstanding bills total less than $1 million, President Jim Chapman said.
Legend has retained a turnaround specialist and now finds itself having to downplay worries about a potential bankruptcy.
"We're not in danger of bankruptcy," said David Oringdulph, Legend Homes' chief executive officer. "What we are doing is reorganizing for a smaller market for the next year."
Along with other builders across the country, the 42-year-old company has been squeezed by declining sales, falling land and home values and lenders becoming more aggressive to recover their investments.
In general, builders say slower than expected home sales have forced them to ask banks for more time to pay back construction loans. Local banks, they say, have been willing to renegotiate.
But builders say Cleveland-based KeyBank has been reluctant to restructure loans to allow them more time. Earlier this year, KeyBank filed a default notice on a Bend subdivision built by Renaissance Homes of Lake Oswego.
With economists predicting even deeper price declines, Chapman said he's had a tough time finding another lender willing to take over KeyBank's loan. Renaissance, though, has since raised enough from investors to pay off the debt, President Randy Sebastian said.
"KeyBank has not been willing to renegotiate," Chapman said. "They're playing hardball."
Roberta Fuhr, KeyBank's national manager for home builder lending, declined to talk about Legend or Renaissance. In general, she said, KeyBank continues to make construction loans but added: "Every lender when they have loans not meeting benchmarks try to get back in line."

The "big squeeze"
Chapman said he worked hard not to overbuild during the 2004 to 2007 housing boom.
The company did expand to Colorado Springs, Colo., and Riverside, Calif., now one of the country's worst markets. The company now has 20 active projects in three states. Since 2000, Legend Homes is the fifth largest home builder in the Salem and Portland areas, according to the Construction Monitor, an industry trade group.
Its sweet spot are middle-class and upper-end housing with an average price of $387,000, Chapman said.
With KeyBank, Legend took out three credit lines to pay for new home construction in three Washington County subdivisions, two in Hillsboro and one in Tigard.
The Hillsboro projects are done and the 349-lot Tigard subdivision is under construction, Chapman said.
In January, KeyBank capped all three credit lines and forced Legend to use all sales revenues from those projects to pay off the credit line balances, Chapman said.
Legend continued construction on six subdivisions, using sales revenues generated elsewhere to pay subcontractors. But by May, KeyBank's requirements ate so far into the company's cash flow that it halted construction companywide, Chapman said.
"We've had lines of credit with KeyBank for 17 years," Oringdulph said. "It's a big squeeze from our best lender."
On May 15, Chapman sent an e-mail to his excavators, framers and cleaning crews to alert them to the problem.
"We are still not in a position to send out checks for this pay cycle," he wrote. "Significant efforts are being made in hopes that can happen, and soon, but too many roadblocks remain. We cannot predict when resolution will occur."
Subcontractors and real-estate lawyers familiar with the deal declined to talk publicly about Legend's troubles. They said they were concerned about compromising their relationships with the homebuilder.
But Brian Clopton, who owns Brian Clopton Excavating, said: "Legend has always been a destination place for subcontractors. It's a very, very well-run company and they always pay their bills."
Asked if the company will have to file bankruptcy, Chapman said: "I would certainly hope not. I'm kind of waiting for our experts to show us the plan. Looking at our books from my point of view, we have a viable operation."
If it comes to it, Oringdulph said, the company has enough equity tied up in land and houses to pay its bills. In the meantime, Chapman said he continues talks with KeyBank.

KeyBank profits down
KeyBank is facing the same housing-related pressures. U.S. banks have been forced to write off billions in bad mortgages and boost reserves for future loan losses.
KeyBank's parent company reported in April that its first-quarter profits dropped 38 percent compared with the same period a year earlier. Citing concerns that included continuing housing troubles, the bank tripled reserves for future loan losses to $187 million, according to the Cleveland Plain Dealer.
KeyBank said it has halted home construction lending in California and any other market where it does not have branches.
Sebastian and Oringdulph said KeyBank has shuttered its home construction lending program in Oregon.
"Not a bit of truth to it," Fuhr responded. "We value our clients. We at this time are selective."
Ryan Frank: 503-221-8519; ryanfrank@news.oregonian.com; blog.oregonlive.com/frontporch.

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/1212548179310830.xml&coll=7&thispage=1

Leo

06-07-2008, 09:25 PM

Portland, Bend make most overvalued list

The notion that Oregon and Portland are immune to the national housing slump continues to wilt.

Research firm Global Insight reported this week that Bend had the nation's second most overvalued housing market in the first quarter of 2008.

Portland was seventh most overvalued and six of the top 16 most overvalued markets were in Oregon or southwest Washington.

Only eight metro areas in the country were considered severely overvalued. Three were in Oregon or southwest Washington. Longview, Wash., hit hard by timber industry troubles, ranked No. 3.

Global Insight predicts those eight markets are in for further price declines of 10 percent or greater. (The Portland area has already seen declines of about 4 percent.)

Eugene (No. 11), Medford (No. 12) and Salem (No. 16) were considered "moderately overvalued."

For more on the report, visit The Oregonian's real estate blog at blog.oregonlive.com/frontporch.
Ryan Frank: 503-221-8519; ryanfrank@news.oregonian.com; blog.oregonlive.com/frontporch

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/121279832666280.xml&coll=7&thispage=3

zilfondel

06-08-2008, 08:18 PM

Oh darn, a speculative McMansion builder about to go under? Cry me a river.

Bet their houses won't last 20 years anyway.

Pavlov's Dog

06-10-2008, 01:30 PM

360Rich

06-11-2008, 12:32 AM

Leo

06-11-2008, 01:47 AM

Have apartment rents remained stable the past year?

What kind of rent can a person expect to pay per square foot in different kinds of markets?

The reason I ask is that I've been fortunate to be living in Norway the past few years and the combination of a strong economy, strong currency relative to the dollar and a massive appreciation of my home equity has put me in a positon to be able to purchase a quadplex or small apartment building. From this side of the pond Portland looks cheap and like a solid long-term bet.

Links to resources would be greatly appreciated.

Do you currently live in Portland, or are you still in Norway? There is a very large variety of rentals in Portland with a wide range of price per square foot. If you don't know the neighborhoods, I'd stay out of buying rental property. If you try to do this remotely, you'll find plenty of people willing to bamboozle you into thinking you can get unrealistic rents. Rents are still much, much lower than equivalent mortgage payments since housing prices have fallen at most 9% from the peak.

Also, if you haven't noticed, this strategy of leveraging home equity to buy rental property in unfamiliar markets is currently driving many people into bankruptcy.

Leo

06-11-2008, 01:49 AM

So when you say you're not in danger of bankruptcy, I guess that's only valid for the day you say it, but it's not applicable for the following week (Bear Stearns, anyone?)

Well, if bankruptcy is a certainty, it may be technically correct to say there is no "danger" of bankruptcy ... :)

Pavlov's Dog

06-11-2008, 09:56 AM

Do you currently live in Portland, or are you still in Norway? There is a very large variety of rentals in Portland with a wide range of price per square foot. If you don't know the neighborhoods, I'd stay out of buying rental property. If you try to do this remotely, you'll find plenty of people willing to bamboozle you into thinking you can get unrealistic rents. Rents are still much, much lower than equivalent mortgage payments since housing prices have fallen at most 9% from the peak.

Also, if you haven't noticed, this strategy of leveraging home equity to buy rental property in unfamiliar markets is currently driving many people into bankruptcy.I'm considering moving back and would only buy rental property if I lived in Portland and could be somewhat hands-on.

My situation is such that I have enough equity in my home in Oslo to be able to sell my house, move to Portland, buy a better house for half the amount with no mortgage, and still have about $400,000 with which to buy an apartment building. I can forsee buying a building for about $600,000 to keep the debt load at about 1/3 of the building's value. I've seen too many people get burned by being too highly leveraged and counting on short-term appreciation. This would be a long-term investment with subsequent re-financing and building purchases.

Leo

06-11-2008, 06:31 PM

I'm considering moving back and would only buy rental property if I lived in Portland and could be somewhat hands-on.

My situation is such that I have enough equity in my home in Oslo to be able to sell my house, move to Portland, buy a better house for half the amount with no mortgage, and still have about $400,000 with which to buy an apartment building. I can forsee buying a building for about $600,000 to keep the debt load at about 1/3 of the building's value. I've seen too many people get burned by being too highly leveraged and counting on short-term appreciation. This would be a long-term investment with subsequent re-financing and building purchases.

There may be some good opportunities in the next few years. Many small apartment buildings have been converted to condos in the last few years; my prediction is that most will convert back to rentals. You may get some good deals. However, these places are also part of a "shadow" supply of rentals right now - speculators have bought them, but have been unable to rent them for the money they want. Eventually, these units will re-enter the market and relieve the artifical restriction in housing supply. In that case, rents may fall.

You don't say how long you've been away from Portand. The rental scene has changed a lot in the last seven years. There is a much larger supply of high-quality, high-cost rentals than in 2000. However, when I look at the exact unit that I rented in 2000, the landlord is only asking a few bucks more than he was in 2000. So beware of the aggregate $/sq ft statistics; they may be seriously skewed by a large shift in the type of rentals available.

Pavlov's Dog

06-12-2008, 06:52 AM

Thanks Leo. I won't be moving to Portland for at least a year. In that time period I expect the real estate market to continue weakening and the dollar too making my probable position stronger.

I'll let you know if anything comes to fruition.

bvpcvm

10-11-2008, 01:29 AM

http://www.oregonlive.com/business/index.ssf/2008/10/portlands_condo_craze_comes_to.html

Portland's condo craze comes to screeching halt

by Ryan Frank, The Oregonian Thursday October 09, 2008, 7:20 PM

http://blog.oregonlive.com/business_impact/2008/10/large_bz.condo.0044.sy.jpg

STEPHANIE YAO/THE OREGONIAN

The Waterfront Pearl boasts rare riverfront real estate and a sweeping view of the Fremont Bridge. But broker Edwina Feeney said the financial meltdown and election worries mean her 76 sales are far slower than she expected for the 194-unit building. But she added: "I don't think we're doing any worse than anyone else."

Portland's once-thriving condo market reached new depths in the third quarter amid the worldwide financial crisis.

The young professionals and empty-nesters who once powered the downtown condo construction boom have gone missing. Prices are falling, but potential buyers face more trouble securing mortgages for new purchases or selling their old homes to cash out their equity.

Portland's condo market remains far better than places such as Miami and Las Vegas that saw even more feverish condo building. But Portland condo brokers, who six months ago sounded upbeat tones, now publicly acknowledge the first significant downturn since the condo market took off in the late 1990s.

To cope, developers have restructured their loans to buy more time or converted their towers into luxury apartments. Even with 1,400 condos pulled from the supply for rent as apartments, the downtown market remains flooded.

Realty Trust City, Portland's leading firm in new condo sales, reports 884 new units available in central city towers. Based on an average of 14 sales a month over the third quarter, downtown has enough to feed current market demand for an astounding five years. That's about six times the duration of inventory for all Portland-area homes at their current rate of demand.

For the first time in years, no cranes are spinning over a future condo tower on Portland's skyline. All remaining cranes are helping to sprout offices or apartments.

Patrick Clark, a Realty Trust City principal, expects one or two more condo buildings to convert to apartments and, after the worst of the crisis passes, condo sales to pick up. He estimated that the current condo surplus will sell out within 18 to 24 months.

"It's hard to tell when the current financial markets will resolve themselves," he said.

The slowdown's pain is harshest for buildings that started construction at the 2006-07 peak of the housing boom and are finishing amid a historic Wall Street meltdown. The developers' equity investors will be the first to lose money. In the worst-case scenario, developers could be forced to turn keys over to their banks.

In a report last month, Wells Fargo economist Ed Kashmarek said Portland's condo developers hadn't panicked yet.

"But that's primarily because many projects haven't been completed," he wrote. "Once they are completed and the interest reserve runs out, they will need to pay interest on their loans out of their own pockets and at that time they will likely lower their prices to attract buyers. Until then, prices may not drop much.

"Prices may have to come down 10 to 15 percent or more, maybe even up to 40 percent, in order to move inventory."

The Westerly in Northwest Portland and The Strand on the Willamette River both advertise reduced prices.

On the waterfront

At South Waterfront's John Ross, prices are discounted nearly 10 percent, said Clark, whose firm is selling the building.

The 31-story John Ross, once symbol of the condo craze, provides a stark example of the market's struggles.

Portland's two most prominent developers -- Gerding Edlen Development and Williams & Dame Development -- partnered on the futuristic building. In 2005, 222 potential buyers put down deposits on condos in the first week of sales.

By October 2007, buyers held only 192 condos, because some sales had fallen apart.

This month, Clark said the John Ross' figure stands at 185.

Gerding Edlen and Williams & Dame have refinanced their loans on the John Ross and, next door, Atwater Place to buy more time.

Room in the Pearl

In the Pearl District, Hoyt Street Properties continues to struggle to sell its latest tower, the 177-unit Encore.

Company President Tiffany Sweitzer told the Daily Journal of Commerce in September that she had seven sales. That's less than the 12 sales she said the Encore had in April. Sweitzer did not return calls from The Oregonian this week.

Nearby, cost overruns and crisis fallout dog the glassy Waterfront Pearl.
The riverfront project's cost increased 12 percent to $93 million partly because of flooding during high water. Pemcor Development of Vancouver, B.C., is seeking more from lenders to cover the costs. But President Paul Mayer said the financial crisis has gummed up his request.

His general contractor, Hoffman Construction Co., has filed a foreclosure lawsuit seeking $10 million in unpaid bills. Without a solution, Hoffman could end up taking possession. "We're still working toward it, and I think we'll get it taken care of," Mayer said.

Broker Edwina Feeney had hoped to sell all of Waterfront Pearl's 194 condos by now. "At this point, I thought I'd be on an island," Feeney said.

So far, she's sold about 40 percent of the building, and she expects she'll need another 18 months to finish.

Meantime, she tries to look at the positives. She recently sold a penthouse condo to a surgeon for $2.8 million. "That to me," Feeney said, "is like three or four sales."

bvpcvm

10-11-2008, 01:33 AM

it occurred to me that, if this downturn really turns into a "new great depression", it could pretty severely impact our expectations of population growth around here. after all, people don't come here for the job market; they come here for the lifestyle and work in coffee shops until they find something better. but that may not be quite as viable if jobs all around are hurting; people will stay where they are rather than risking a move.

zilfondel

10-11-2008, 09:28 AM

^ or people will be stupid and move here after being laid off somewhere else, as its cheaper than California.

Hmm... sounds familiar, dont it? I somehow doubt there will be much change, as you can always add another roommate to a rented house or apartment. I have noticed that it is now more common for people to share 1-bedroom or even studio apartments with roommates...

NJD

10-20-2008, 10:35 PM

Portland vs. Seattle: A tale of two cities
Unico president says that while Seattle battles self-interest, Portland simply gets things done

DJC POSTED: 04:00 AM PDT Monday, October 20, 2008
BY SAM BENNETT

As president of Unico Properties, Dale Sperling is expected to look at the big picture.

But to understand the market forces affecting commercial real estate, Sperling said he thinks beyond the numbers.

“To be successful in the real estate business, you have to understand sociology, psychology and demographics,” said Sperling. “The real estate business is not just about creating pro forma forecasts. It’s about understanding how the world works.”

Speaking at the Commercial Association of Realtors quarterly meeting last week, Sperling said “These are the best of times and the worst of times” for the Northwest economy and commercial real estate. “The past few months have been an energizing time for me. There are opportunities for those of us with patience.”

Sperling titled his presentation after Dickens’ novel “A Tale of Two Cities,” referring to the Portland and Seattle real estate markets. He noted that Seattle has 8 million square feet of commercial space under construction, compared with 2 million square feet in Portland. Unico owns and manages properties in both cities, including the new Lovejoy in the Pearl District and partial ownership of U.S. Bancorp Tower.

John Mitchell, an economist and owner of M&H Consultants of Lake Oswego, said Oregon’s major cities are seeing rising unemployment and the state’s forestry industry is being hit by the housing market crash. At the same time, Seattle has been hurt by the collapse of Washington Mutual and, more recently, the ongoing machinists’ strike at Boeing.

Sperling said office vacancies in both cities are around 10 percent, but that’s where the similarities end. As home base to large corporations such as Microsoft, Starbucks, Amazon and the Gates Foundation, the Seattle area has thrived in good times.

“Seattle has a long tradition of booms and busts,” he said. “But it has a more dysfunctional political environment. Portland’s leaders have a more coherent vision of what they want and are more tolerant and experimental with civic issues. Portland has a culture of community versus a culture of self-interest in Seattle.”

Seattle’s political fighting dates back to its early founders William Bell, Arthur Denny and Carson Boren, who couldn’t agree on how to lay out the downtown streets. Fast-forward to 2008 and Seattle’s political leaders are mulling over more than half a dozen options for replacing the Alaskan Way Viaduct – seven and a half years after an earthquake rattled the waterfront thoroughfare.

Next year, Seattle will get its first light-rail connection from downtown to Sea-Tac International Airport. But Sperling said that comes 13 years after voters approved the line.

“Seattle cannot seem to figure out any compromise or solutions to traffic and congestion,” he said. “Seattle has seven independent transit agencies. Its nine-member city council is in need of adult supervision.”

While Microsoft, Amazon and Costco have created “unimaginable wealth and philanthropy,” Sperling said Seattle’s billionaires spend more time on the world stage than locally, referring to Bill Gates speaking at the World Economic Forum this year in Davos, Switzerland.

“The downside of wealth is it removes leaders from the texture and context of their communities, and it takes them to Davos instead of the (Greater) Seattle Chamber of Commerce.”

Comparing the Pearl District with Seattle’s South Lake Union neighborhood, Sperling said billionaire Paul Allen, who owns large chunks of South Lake Union, was unable to rally the city around his vision to build a 61-acre park and provide an infusion of new development to the area. Voters rejected the proposal in 1995.

“Portland has a diverse, yet cohesive community of developers (who created the Pearl), versus a single developer (Allen) who could not rally the community around his vision,” he said. “It feels like the Pearl was transformed overnight into a wonderful, vibrant and rich community of new and old buildings, with condos, apartments and parks. It’s got it all.”

But Sperling, who is based in Seattle but has lived in both cities, said he is bullish in the long term concerning the commercial real estate markets of Portland and Seattle. “We will stick around for the rebound,” he said.

Leo

10-28-2008, 06:45 PM

Some information about sale percentages in some of our favorite new construction condo towers:

http://agent503.com/2008/10/24/new-construction-condos-adjust-pricing/

I don’t know how accurate the information on that website is, but it is encouraging that some developers are finally beginning to cut prices in order to sell units. If they cut enough, they may even be able to fill some of these towers with residents.

Leo

01-27-2009, 07:19 PM

Some good news for renters: http://finance.yahoo.com/real-estate/article/106480/Rents-Drop-Nationwide-as-Vacancies-Spike

20% rent drops in Manhattan – Now that’s crazy. Luxury new constructions were the hardest hit in Manhattan; my guess is they will offer the biggest price cuts in Portland as well, eventually.

Portland has the #6 biggest rent drop with a mere 3.2% decrease, so far. Doesn’t look like the conventional wisdom of higher rents due to fewer home buyers is going to pan out...

Rents Drop Nationwide as Vacancies Spike
by Prashant Gopal
Friday, January 23, 2009
provided by BusinessWeek

The economic crisis has opened up opportunities for apartment tenants. The inventory of vacant apartments is expanding, and rents are dropping quickly in major metros across the country.

For renters with leases about to expire, it's time to negotiate. Landlords are working extra hard these days to keep units filled.

Of course, your ability to hold on to an apartment—especially a luxury unit—depends on how secure you feel about your own job. Americans lost about 2.6 million jobs in 2008 (mostly in the final quarter of the year) and are likely to lose millions more this year. They are losing money on stocks and other investments and are cutting back on costs by downsizing and moving in with family members or roommates as they hunker down for a deep recession.

Landlords, as a result, are forced to offer discounts to fill vacancies. Apartment vacancies spiked in September after the collapse of Lehman Brothers and the eruption of the financial crisis.

Go for a Long Lease

"If you've got job, it's a great time to be a renter and to sign the longest lease possible," said Ron Johnsey, president of Axiometrics.com, a Dallas apartment data company.

BusinessWeek.com worked with Axiometrics to come up with a list of 25 large metros where rent declines accelerated most at the end of 2008. In Salt Lake City, where the economy had been holding up better than most cities, effective rents (including landlord concessions) fell 2.3% in the fourth quarter compared with the previous quarter. By comparison, rents were climbing 3.3% in the fourth quarter of 2007.

The New York metro area, including New York City and its New York and northern New Jersey suburbs, saw a 3.7% drop-off in effective rents in the fourth quarter (compared with a 0.5% increase in the fourth quarter of 2007), according to Axiometrics, which surveys landlords across the nation once a month.

The situation has changed dramatically in the expensive Manhattan market, where tenants are suddenly in control. The layoffs on Wall Street have forced landlords to cut rents; offer one, two, or even three months' free rent; and pay the broker fee that the tenant would otherwise pay (often 12% of the annual rent).

Luxury High-Rises Hard Hit

Vacancies are rising most in the high-end doorman buildings, particularly in the Financial District, said Daniel Baum, chief operating officer for the Real Estate Group NY, a residential sales and rental brokerage firm. But rents are falling all across Manhattan, in all price categories, he said. Some landlords have dropped rents as much as 20% to lure tenants, he said.

"The luxury high-rise market, especially new construction, is the one taking the worst hit," Baum said. "There's a building offering three months' free rent in the Financial District."

Victor Calanog, chief economist for apartment research firm Reis said landlords nationwide are more motivated to cut rents than they were after the previous recession at the beginning of this decade. Landlords now are under pressure to keep tenants because vacancies are higher than they were in 2000 and so are the debt payments they need to cover. Too many vacancies, and some landlords are likely to face foreclosure, he said.

"I've never seen this kind of acceleration in decline," Calanog said. "It's somewhat sobering."

Metros With the Biggest Rent Drops

Salt Lake City

Rank: 1
Rent drop: -5.7%
Q4 2008 rent change: -2.3%
Q4 2007 rent change: 3.3%
Effective rent: $810.30

Salt Lake City, Utah's capital and seat of the Church of Jesus Christ of Latter-Day Saints, saw a large slide in apartment rents during the fourth quarter. The slowing real estate market has hurt the job market in construction and housing, though employment remains relatively tight. The unemployment rate climbed to 3.4% in November 2008 compared to 2.6% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 3.1% in the same period in 2007. Landlords on average are giving 2.2-week rent concessions.

Nassau-Suffolk (Long Island, N.Y.)

Rank: 2
Rent drop: -4.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 1.5%
Effective rent: $1,786.60

Apartment rents in Long Island's suburban counties have dropped as Wall Street layoffs and tumbling home prices have taken a toll on the economy. The unemployment rate climbed to 5.2% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate fell to 3.1% in the fourth quarter last year from 4.3% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.

Raleigh-Cary, N.C.

Rank: 3
Rent drop: -4.0%
Q4 2008 rent change: -4.4%
Q4 2007 rent change: -0.4%
Effective rent: $752.70

Raleigh, the state capital and home of North Carolina State University, has been somewhat buffered from the recession until recently, in part because of its university, health-care, and government jobs. But apartment rents are falling as problems in the larger economy take their toll. The unemployment rate in the Raleigh-Cary metro area climbed to 6.1% in November 2008 compared to 3.5% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 5.3% in the same period in 2007. Landlords on average are giving 3.1-week rent concessions.

New York-Wayne-White Plains, N.Y./N.J.

Rank: 4
Rent drop: -3.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 0.5%
Effective rent: $2,672.20

The New York-Wayne-White Plains metro area is a vast area that includes New York City and the suburbs of northern New Jersey and Westchester County. Rents, along with home prices, had been growing in Manhattan until the financial crisis took hold in mid-September. Since then, rents have dropped as landlords adjust to the new reality. Major layoffs at financial firms and in other sectors have forced tenants to give up expensive apartments and move in with parents or roommates. The unemployment rate climbed to 6% in November 2008 compared to 4.6% in November 2007. The apartment vacancy rate jumped to 4% in the fourth quarter last year from 3.4% in the same period in 2007. Landlords on average are giving rent concessions of 1.1 weeks.

Seattle-Bellevue-Everett, Wash.

Rank: 5
Rent drop: -3.5%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.3%
Effective rent: $1,161.60

Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.

Portland-Vancouver-Beaverton, Ore./Wash.

Rank: 6
Rent drop: -3.2%
Q4 2008 rent change: -2.8%
Q4 2007 rent change: 0.4%
Effective rent: $850.40

The Portland area, known for its environmental consciousness, microbrew beer, and cultural offerings, has seen manufacturing layoffs spike in the last several months. The unemployment rate climbed to 7.2% in November 2008 compared to 4.7% in November 2007. The apartment vacancy rate jumped to 5.8% in the fourth quarter last year from 4.6% in the same period in 2007. Landlords on average are giving rent concessions of two weeks.

San Jose-Sunnyvale-Santa Clara, Calif.

Rank: 7
Rent drop: -3.0%
Q4 2008 rent change: -3.0%
Q4 2007 rent change: 0.0%
Effective rent: $1,788

Silicon Valley, the nation's technology capital, is suffering from layoffs and dimming economic prospects as the recession deepens. The unemployment rate in the San Jose metro area climbed to 7.2% in November 2008 compared to 4.9% in November 2007. The apartment vacancy rate jumped to 4.2% in the fourth quarter last year from 3.5% in the same period in 2007. Landlords on average are giving rent concessions of one week.

Charlotte-Gastonia-Concord, N.C.

Rank: 8
Rent drop: -2.9%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.9%
Effective rent: $736.40

The recession struck the Charlotte area later than it did much of the country, but the banking center is now getting hit. Layoffs are accelerating in and around Charlotte, home of Wachovia and Bank of America. The unemployment rate jumped to 8.1% in November 2008 compared to 4.8% in November 2007. The apartment vacancy rate jumped to 8.5% in the fourth quarter last year from 6.3% in the same period in 2007. Landlords on average are giving 3.1 weeks of rent concessions.

Oakland-Fremont-Hayward, Calif.

Rank: 9
Rent drop: -2.9%
Q4 2008 rent change: -2.1%
Q4 2007 rent change: 0.8%
Effective rent: $1,515.40

In the Oakland area, located across the bay from San Francisco, economic troubles have only gotten worse with the financial crisis. But it has also seen a rising tide of foreclosures. The unemployment rate in the area climbed to 7.2% in November 2008 compared to 4.9% in November 2007. The apartment vacancy rate jumped to 4.6% in the fourth quarter last year from 3.9% in the same period in 2007. Landlords on average are giving 1.4 weeks of rent concessions.

Boston-Cambridge-Quincy, Mass.

Rank: 10
Rent drop: -2.8%
Q4 2008 rent change: -2.4%
Q4 2007 rent change: 0.5%
Effective rent: $1,634.20

The Boston area, home of Harvard University, MIT, and Boston University as well as some of the nation's finest hospitals, is seeing damage to its financial sector. Thousands of financial-services layoffs have been announced, including major cuts at Boston-based State Street and Fidelity investments. The unemployment rate climbed to 5.0% in November 2008 compared to 3.6% in November 2007. The apartment vacancy rate jumped to 6.0% in the fourth quarter last year from 4.7% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.