Kerri Hartnett

For the past couple of years, we've been hearing the term shadow inventory, and how it could possibly threaten our already slow housing recovery. Shadow inventory is a term given to homes that are more than 90 days behind on their mortgage payments, homes that are currently in foreclosure, as well as houses already back in the banks hands. These homes are taken back by the banks, and held off of the market so that the market is not flooded with foreclosures, which will ultimately diminish options for traditional sellers and buyers who are planning to move.

According to a recent report issued by Standard & Poors, the foreclosure rate in Portland, Oregon was up to 47% between September of 2009 and December of 2010, with 45 months of this inventory entering the market over the next few years. This is not great news for traditional sellers who are in direct competition with these distressed property prices, as they will be forced to price their homes low enough to attract buyers to make an offer.

This so called "shadow inventory" could possible depress home values further, delaying the housing recovery for longer than anyone has anticipated. However, there are some bright spots according to an S&P Annual Report, stating that the volume of mortgages that are either delinquent, or in foreclosure and have yet to hit the market, continues to fall, although at a progressively slower rate.

So how does one stay ahead of the curve when it comes to selling a house in today's real estate environment? In today's market you have to be the in the best condition at the lowest price, to win this price war. If you are considering selling your home, I would recommend to act fast, as we do expect to see more distressed properties, as well as traditional sales coming on the market in the spring time. That means more supply for less demand, giving buyers more of an upper hand in the negotiations of price and terms. My advice to you would be to contact a local REALTOR to help you determine what the best strategy is to get your home sold.

Can you believe that we're already one month into the new year? Time sure flies when you are having fun, and what a fun ride the Portland real estate market has been so far. We're off to a great start with increased activity on showings, as well as sales in the Portland Metro area.

Economic indicators suggest that we will start to see interest rates climb to over 5%, sometime in the first quarter of 2011. Some lenders are starting to loosen up guidelines, to allow borrowers with low credit scores to possibly qualify for a home loan, states Shelby Bishop, a mortgage professional with Prospect Mortgage in the Portland area. The key to purchasing a home is finding a loan program, and a home that meets your needs both financially, and for your individual lifestyle.

In January, the average detached single family home in North Portland was listed at $243,000 and sold for $230,000 in 73 days on the market. In Northeast Portland, the average was listed at $292,000 and sold in 89 days for $266,000. And the average in Southeast Portland was listed at $236,000 selling for an average of $202,000 in 81 days. These prices, coupled with low interest rates mean that owning a home could cost less than rents in most Portland areas, which is good for both buyers, and sellers.

Every market is different and your local real estate expert can help you detemine what house values are in your neighborhood. If you or someone you know is thinking about buying or selling a home in todays market, talk to your trusted REALTOR to help guide you through every step of the process

Portland Median Sale Price

Portland Home Values - Interactive chart

This week I had the opportunity to listen to one of our favorite local economists of choice, when it comes to the Portland real estate industry. Mindy Sullivan has been working in and following Portland real estate trends for 35 years, and she tells an insighful story for what's in store for 2011. We took a look back at the history of Portland real estate, and who the players are that drive the market, starting back in 1990 when the country came out of the last recession.

For a period of time in the early 90's our market was driven by Californians investing in the Portland area, and interest rates were at nearly 10%. In 1993 interest rates dropped to record lows, and the baby boomers began refinancing their homes, which is when Portland saw an increase of first time home buyers in the market. In 1994 the growth in Portland reached 2.4%, which later lead these buyers to drive the market in 1998 after becoming established in the area. Between 2001-2003, Oregon had a small recession, yet the housing market continued to soar with increased building and appreciation of homes.

In 2007, the Portland market dropped in both home sales and prices, and we continue to do so in most areas of Portland. The good news is that if you've been looking for the bottom of the market, we seemed to have approached it, and will likely be bumping along it for much of the next year. Despite the sharp drop in sales and prices over the passed 3-4 years, our home values are on Parr with where the national rate of appreciation should be.

So who's driving the real estate market today? There are certainly many different players in today's real estate market. We have the banks in the game, distressed sellers trying to short sale their home, along with the traditional seller who are forced to compete in an unjust marketplace. Until we are able to get through the current inventory of homes, as well as all the shadow inventory that hasn't even hit the market yet, we will not see significant appreciation. Some even predict that it could take another 4-5 years before we return back to a more balanced market.

This is definitley a market of opportunity for some people, and they are smart to take advantage of the affordable prices, and historically low interest rates available today. We are still seeing a large number of first time home buyers who are positioned to keep their homes for 10 or more years, gaining equity and all of the benefits of home ownership.

Investors are another group of buyers who are driving our market today. The city of Portland anticipates that within two years, we will have a shortage of rentals available. According to Realty Trac almost 1000 Multnomah County homes are in foreclosure status between $100,000-$200,000. Investors can pick up 1-2 rental homes that will cash flow, hold on to them as rentals, and sell them when the market returns after 4-6 years.

The future real estate market in Portland includes many factors, including employment, and personal income growth, both expected to improve slightly in 2011. We also need to gain the consumer confidence back in the housing market. Home ownership really does matter, and is a major stepping stone for building personal wealth. It is still the American Dream to own a home, and there has never been a better time to buy than right now!!!

October through December tend to be slower months for real estate sales, at least here in Portland, OR, which is no surprise as we get closer to the holiday season. However, for those buyers and sellers who are willing to stick it out through the last quarter of the year, there are some rewards to benefit from.

Most buyers and sellers are occupied with holiday traveling, or entertaining as the year draws to an end. While serious buyers and sellers are actively in the real estate market, taking advantage of less competition with homes listed, as well as fewer buyers who are not serious about purchasing a home. This helps bring a certain balance to the market place, which is helpful for creating a win-win real estate transaction for both parties.

According to the RMLS Market Action report, Portland real estate prices are down by roughly 3%, however, closed sales increased nearly 4% and pending sales have increased about 3.4% over the past year. In addition to decreased time on the market. What this means is that now is the time to get a home at rock bottom prices, with rock bottom interest rates, making homes the most affordable that they have been all year, resulting in a savings that is much greater than the $8,000 tax credit offered to first time buyers in the early part of 2010.

You can now own a home for less than what most people pay in rent. Since we all need a roof over our head as a basic necessity of living, shouldn't it be you who benefits from homeownership? When people change the way they look at things, the things that people look at start to change. And real estate is definitely no exception to that rule.

Portland Zillow Home Value Index

Portland Home Values - Interactive chart

Fall is such a festive time here in Portland, Oregon, with so many harvest activities to choose from. This week we took our annual trip out to Sauvie's Island to the Pumpkin Patch, and ended up on Kruger's Farm. The farm is located about 20 minutes outside of downtown Portland and is the place to be during pumpkin patch season.

Families from all across Portland and beyond came out to enjoy corn on the cob, and candied apples. Fun was had by all, including some four legged friends, romping around the corn maize. The sun was shining, and the fields were full of pumpkins and munchkins. There was no better way to spend a Sunday than with family and friends, soaking up some last minute sunshine before winter sets in.

It's been a fall tradition in our family for five years to visit Sauvie's Island Pumpkin Patches. One that we share with many other families in Portland. It's a great way for our community to support our local farmers in the area. To support Kruger's without heading to the island, you can visit them in North Portland at their St John's Farm Stand at 7136 N Lombard.