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My Evening with the Bubble Bloggers
Tomorrow night (June 20) around 8pm, I’ll be walking into the veritable lion’s den.
More specifically, I will be sharing barley, hops, yeast, and water (that’s beer, folks) at the venerable Lucky Labrador with some of Portland’s most active housing ‘bubble’ activists and bloggers, as organized by the Portland Housing Blog and the Portland Real Estate Outsider.
For the uninitiated, the Portland Bubble crowd (sorry, I don’t have a succinct alternative) is a vocal blogging community that has been sounding klaxons that the Portland real estate market was/is primed for a crash–fueled by lax mortgage standards, poor REALTOR ethics, and irrational economic exuberance that artificially drove up home prices in Portland.
If you follow these downturn blogs, the rhetoric can get a little thick, particularly when it comes to comments relating to real estate ‘insiders’, like agents. Interestingly, though, for all the passion that goes in to posting and commenting about real estate matters, most participants remain anonymous.
Nevertheless, many readers of these two blogs have been the most active commenters at re:PDX and a few of the other top Portland real estate broker blogs. And while the tone sometimes gets a little snippy, often the ideas and thoughts expressed are well-reasoned and challenging.
It certainly keeps me on my toes.
I’ve often wondered if the views shared by many bubble followers are mainstream. So, my question to all you quiet, non-bubble bloggers is, “What would you like me to ask the bubble crowd?” If you are apprehensive, you can comment to this post as ANONYMOUS, or send me a note privately.
Here are a just a few questions on my mind:
- What do you do for a living? (I know a couple work in health care and in financial services).
- Do you believe REALTORs are immoral for representing clients while buying or selling properties in a declining market (or appreciating market, for that matter)?
- Why aren’t you more transparent about your identity when posting to blogs that you don’t agree with (or even those you do)?
Due to the anonymity of most participants, if I am the only broker that attends (and I hope I’m not), I will likely be the only participant that anyone recognizes. It should be interesting….
Photo by tlindenbaum. Used under Creative Commons license.
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11 Responses to “My Evening with the Bubble Bloggers”
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Ahh, Ron, immoral realtors are those that gloss over that massive crack in the foundation noted upon inspection, or the crumbling foundation because they don’t want to sale to fall through , those that say “you are throwing away your money by renting,” w/out knowing my rent$, those that quote Mr./Dr. Yun and say Portland’s prices will appreciate 30% over the next few years, those that say RE never goes down, those that encourage neg am loans, option ARM loans assuring that the home will appreciate enough to refi in a few years, you catch my drift?
I will stop being so critical of the RE industry when NAR ceases to exist (at least their BS ads) and when realtors that run these blogs admit that Portland prices are unsustainable w/out the liar loans, ARM’s, option ARM’s, Californians (that can’t seem to sell), etc.
Someone please tell me how a family can afford a 250K mortgage (obviously on the low end), AND set aside 10% for retirement, AND pay for health insurance, AND a rainy day/house and car repairs/maintanance fund, AND car insurance, AND utilities, AND gas (gasp!), and food…not to mention childcare expenses for some(mine will run me around $1600/mo next year!) and entertainment, clothes, vacations, etc
PITI and mortgage insurance= approx $2k/mo
utilities= $200/mo on average
car insurance=$200/mo
gas for cars= $250/mo
food= ?$800/mo?
Y’all bring home $3500 PLUS per month just to cover the bare minimum? How many folks are living off of CCs? How many have stopped contributing to their retirement? How many are cashing out their retirement?
PS from my name and email address I will give you one guess as to my name…and you probably have guessed that I am an RN
See you Friday if I don’t have to work late, though I do have to report early Saturday a.m. so I won’t be out too late, unfortunately.
“It certainly keeps me on my toes.”
Ding ding ding! We have a winner!
This is exactly what I’m trying to do, keep Realtors, and moer specifically the NAR on it’s toes.
I started my blog not because I wanted to spend all day flaming Realtors, but because I couldn’t get a straight answer out of the NAR about home values and which direction they are going.
The level of statistical analysis the NAR puts out is pathetic. You’ve worked in large corporations before Ron, and I bet if you presented that level of analysis you’d get laughed out of the room. I know I would. But nobody was questioning it until Clint and I came along.
I’m glad you’re coming tomorrow Ron, I’m looking forward to meeting you and I hope Charles and other Realtors come as well. The best thing we can all do is keep the debate open and healthy, it benefits everybody in the end.
Ian
Oh, and here is my favorite question to ask folks who doubt Portland’s housing concern. Ron and all other readers, if you bought your house 7-10 years ago could you afford it today now that it has doubled in ‘value’? I will answer first, we bought in over our heads in 1999 at $179K and sold last year for $370K…there is NO WAY in hell we could afford that kind of mortgage ($370K) now even if we were double income and no kids.
As of 10:30am I’m planning on attending - I’m on call so I may have to run off of be an anti-social dork and plug the laptop in if the crackberry jiggles it’s dainty little bottom.
I’ll be easy to recognize - I’ll probabl be the only 6′2″ shaved headed lout with the thick Irish accent
Looking forward to meeting everyone.
Ahh, I wish I could have attended this one. I’ve never been a huge follower of the bubble crowd, and I doubt they follow me and my work, but it would have been worth it just to get in on the conversations.
Maybe next time…
I am putting together a big networking event for July. Maybe a some of you guys will show up for that?
-Jeff
I missed this get-together and it would have been fun.
I’m a full-time design engineer who also owns 11 rentals in the three portland metro counties. I’ve been a landlord since 1977.
I can tell you that from my viewpoint, it makes no sense to own rentals in Portland at these prices. There is a big gap between (what economists call) the “risk-free return” and the cashflow yields on single-family homes. To close the gap: prices (NAV) must fall, rents must rise, or treasury yields must drop to the 2-3% range.
This all matters because equilibrium in housing (here) will not be seen until there is equilibrium in the rental markets. No ifs, ands, or buts. This is an outcome of buy/rent decision, net of rent controls (happily we have none), and absent the supply concerns of some other coastal markets.
A prior poster complained about affordability, which is another fundamental valuation measure for this market that should be examined.
As I type this: the HUD median family income for Portland is $67,500. Using the conventional lending guidelines: this median family can possibly qualify for a payment of $1800. This assumes no other debt (a frugal family, to be sure) and credit above 720 or so. At today’s 6.3% 30y rate, the maximum loan available to this median family is $290,000. They’ll need a down payment, of course and that down adds to the maximum affordability. With a 20% down, the maximum purchase they can qualify for is about $358k.
I bring that up to illustrate a couple of things.
1. The median family can make the payments on the median home (in Portland). Whether they SHOULD or not, and whether they’ve SAVED THE DOWN or not are different discussions (though related).
2. Portland is not LA, SF, or even Seattle. In those areas, there is a vast disparity between median incomes and the affordability of the median home. Closing that gap requires incomes to rise or prices to fall. In San Francisco, the median family income is only 58% of that which is required to make payments on the median home (Dec 07).
3. The calculations are in-line with external affordabilty measures (such as http://www.housingtracker.net/affordability/)
With a house, we don’t have the luxury of dollar-cost averaging as we do with many other investments. You buy it once. The prospective buyer has to weigh all of the rent incentives against the buy incentives at that time, and make a calculated decision to by or rent accordingly. Everyone knows that housing (in Portland) will eventually rise again and with 1M people moving here in 20 years, demand will continue to be strong. But timing the bottom in this one-time purchase is tough and it takes guts.
One last thing: a prior poster mentioned buying a house and yet still saving for retirement. We know from both the EBRI and the Fed Survey of Consumer FInances that they are not saving (much), so dispel that concern. The statistics regarding retirement saving are downright frightening. Whether it’s a house, a car, consumer debt or whatever: the money is going elsewhere.
Sorry I missed the party.
-Doug
Doug has great comments. I own rentals and they don’t pencil out, yet. I believe this will change in the near future and according to some financial publications Portland is considered one of the better rental markets as far as future increases in rent. Remember, we have Urban Growth Boundary, good prospects for future employment growth, growing population AND the cheapest housing on the west coast. Wages are lagging but I believe they will catch up as Portland attracts more bio tech and other higher paying industries. As for the average person buying the average or median house in Portland, sure. I believe Bearlee budget is a little over the top - auto insurance 200 month? As of today, a 300k house purchased on a FHA with 3 % down with have approx payment of $2100 month piti (including PMI). According to Doug’s figure of HUD $67k income, Portland is affordable. Could somebody do me a favor and tell me what Portland’s yearly appreciation rate was from 2000 until 2006 compared to the top five major bubble cities. I bet it is quite a different number
Jeff, I must be in need of some serious financial advising;O) I would love to see the spread sheets when they figured $67K could afford a $300K house. Feel free to break it down for me since I just don’t get it. I have yet to get someone on one of these housing blogs demonstrate this.
I am a median kind of girl. I made $65K as a FT RN in 2007. After having 13% pulled for my 401K, health care premium, and state and federal taxes I brought home around $1500 every two weeks. Given that 10 out of the 12 months I got only 2 paychecks you can say I brought home $3000/month (with a $3K annual ‘bonus’).
Our last mortgage on our Buckman house was $250K at 5.63% making the monthly payment $1,439.93, property taxes $2200.00/yr, insurance $550/yr…so PITI was $1,669.09/month. (no PMI)
Gas, water, and electric averaged $300.00/mo
So basic housing expenses alone were $1,969.09
This left $1,000/month for food, gas, car insurance (my spouse likes to collect speeding tickets at about 1/yr), phone (landline or cell), savings.
In addition, my family had childcare expenses, FT for an infant was $900/month. Plus, unique to my family, tuition for spouse.
How many families have car payments? We don’t.
Luxuries= vacations, even going to Cannon Beach, going out to eat, a foofoo coffee once in a while.
So needless to say, the child care expense sent us over the edge. We sold near the peak in spring of 2007.
Please feel free to tell me how that $1000/month was is gonna cover the non-housing expenses.
I forgot to add in there the $ for house (and car) repairs/maintainance, H2O heater, furnace, roof, plumbing, exterior paint, seems never ending in an old PDXer.
Bearlee: Perhaps a family with a spouse in school and children who need day care should NOT be homeowners. Obviously you have too many other financial obligations to take on a 250K mortgage at this point in your lives. Why do you think you’re entitled to own a 250-300K home while you’re stll in school and raising children on one income? Sorry, but the market doesn’t owe anybody the right to own their own home.
Looks like your priorities were in the wrong place. If owning a home was that important to you, then you could have delayed having kids and going to school so that you could afford your mortgage. You can’t have your cake and eat it too. When I decided to buy, I couldn’t afford anything in SF (at age 35, middle income), so I chose to sacrifice living in the city in order to become a homeowner. I bought a one bedroom condo in Oakland.
You have options – you can rent, you can move to a city that is more affordable for your financial situation, but you can’t expect Portland to cater to you personal circumstances. Capitalism just doesn’t work that way.
Here’s a tip: Move to Buffalo, NY. As a nurse you’ll easily find a job and make a good income. You can by a huge old Victorian era house in Elmwood Village (think Hawthorne) for 150-250K. If you’re stuck on Portland, suck it up and figure out a way to make it work. You’re owed nothing, and playing victim will get you zero sympathy!
So many of you posters here seem to think Portland owes you the house of your dreams at he price you want to pay – it doesn’t work that way in the real world. Stop the whining and get a clue!
Moral Realtor, you missed my point. I am not a bitter renter. Owning a home is not a priority right now. If It was I’d be commuting from the outer burbs. My point was at an income of $65K a 250K mortgage is out of reach. So when folks say that a median income family can take on a $300K mortgage I’d like to see the break down.
PITI and utilities came to $1990.00 for my $250K at 5.63% leaving $1,000/month for food, gas, car insurance, home repairs, clothes, etc. Ignore the child care expense, ignore the tuition. What do you all spend on food, gas, car insurance, incidentals per month. Would $1,000 cover it and leave a bit for savings?
Can you see why it would be quite the stretch.
I am not bitter, my priorities are well in order. We will start house hunting once the spouse is done with school. We will likely be back on the east side. We bought in Buckman with plans of no lay-offs and no plans for kids. Well, ten years later, three lay-offs later and the decision to have kids, a house was no longer in the cards. Not bitter, just a little shuffling of the cards.
The young couple who bought our home bought more home than they could afford, according to their letter to us during the selling process, but they really wanted to raise their family in the hood where they grew up and they were tired of being out-bidded on the 300K homes on the close-in east side. Gee, I see it coming now, they barely can afford the place now (we took off 10K in sympathy and they financed the entire $370K, imagine that mortgage) and they wanna have kids…wonder how they are gonna pull that off.
Our increasing foreclosure rate tells me a lot of folks got in over their heads these past few years.
I am not whining, I just want people to state facts and back them up. I grew up in Iowa, I know what I can get for $100K but the weather, summer and winter, sucks! As it does in Buffalo.
What really concerns me about the current economy/housing market is the ever increasing debt and ever decreasing retirement accounts…if that’s the American way than I guess I am rather unpatriotic.
I
Great breakdown and comments on PDX market. I think I found my people! I agree that 65K is not reasonable for a 250K mortgage! We have a $200K mortgage with an income of $113K and it works fine (we put away about 25 per cent in retirement) but if we were making half of what we make I don’t think it would work. We’re in our late 30’s with young children, only my husband works (I’m taking time off of non-profit work to write that novel and screenplay and take care of my preschooler). Our income will go up this year, as I have take on grantwriting gigs for pay and may actually sell the screenplay! We couldn’t buy in the Bay Area in our 20’s and chose Portland, because of family, the Urban Growth Boundary and cost of living and we like the size of the city (enough to be interesting, not enough to be a pain). I know a lot of former Pacific Northwest-raised Californians who are coming back because, what Colbert said is true, PNW is the US’s Sweden. Greater commitment to the things that matter. We’re an American Indian family and we chose PNW over our reservations (in Arizona, South Dakota & Ontario) because all this trumps the poverty and despair we saw there. Yeah, I could buy a big house for 8K on the rez, but the schools would be bad, there would be gangs, my hubby would have to take Comp. Sci teaching job at the local university and commute crazy amounts, instead of riding the MAX and doing interesting cutting edge software like he does here. The public schools are great why would we choose otherwise?
We want to buy our next house, but yeah, we’re waiting for that lowest point to take advantage of. We missed the 1991 fallout of the real estate market in the Bay Area (we were not out of school) and all the folks five years older than us made a killing buying then, even if they had to rent out every room in their house to keep it after being laid off. It sounds horrible, but we see this as our opportunity. We bought low here, just before the market went crazy, so that felt good. I do feel for PDX’ers who are caught in that same net we felt in SF.