According to a recent white paper by the Market Insights program at J.P. Morgan Asset Management, now is the time to invest in real estate.  While the housing market remains depressed, market strategists and analysts at J.P Morgan believe that buying real estate will prove to be a wise investing choice. Low home prices and mortgage rates, along with a reduction in home building, are combining to create not only an ideal buyers’ market, but an ideal investors’ market as well.

Home Prices

Compare the average household income to home prices.  At the height of the market, the median price of a single-family home was 185% to 230% of household income; now the ratio is 153%.

Mortgage Rates

Mortgage rates are at an all-time low.  The median mortgage payment on a single-family home is currently 6.9% of household income, less than half the 14.4% average since 1966.  This creates the opportunity for long-term financial gain for buyers who lock in long-term financing at the current low rates.

Cost of Alternative Housing Choices

Until about five years ago the average mortgage payment was 150% of the average rental cost.  Now, the average mortgage payment is 78% of average rent.

Supply of New Housing

Compare home prices to the cost of building new homes.  Since 1975 U.S. residential real estate has been worth about 55% more, on average, than the cost of building it. During the housing boom home prices rose much faster than construction costs, so that by 2005 the value of homes was twice what it cost to build them.  Home building was profitable, and easy.  Since then construction material costs have risen while home values have plummeted.  Home building has ground to a halt.  Home prices will have to rise significantly before builders will be able to build again and increase the supply of new housing.  This restricted supply will put upward pressure on prices and should comfort current homeowners and buyers.

What about the “shadow inventory” of homes in or close to foreclosure? It is estimated that about two-thirds of these homes are not yet listed for sale and therefore are not in the inventory of unsold homes.  Some variation on that estimate is true.  We have consistently seen, however, that banks are placing these homes on the market as the market will support them, and are not flooding the market with a supply of distressed properties.

Demand for Housing

Normal demographic trends are building pent-up demand. The recession of 2008-2009 resulted in couples postponing marriage, families postponing children, and immigrants not coming to the U.S. due to the lack of jobs.  Despite the slow economy, however, these trends already support more home building than is occurring, and will only increase as the economy improves.

Summary

Home prices, housing demand, and home building are still low, but they all seem set to increase.  Housing inventories remain high in some areas (when “shadow inventory” is included), but are on a downward trend. And while the attitudes of both home buyers and lenders remain cautious, they should become less so soon.   Buyers and home owners should not be discouraged by the current market; it is only creating a pent-up demand for increase.  Although the U.S. housing market remains extremely depressed, current valuations and demographic dynamics make now the time to consider investing in housing.

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Last Friday a British national daily newspaper, The Guardian, named Portland one of the five best places to live in the world, along with the north coast of Maui, Hamburg Germany, Istanbul and Santa Cruz in the Canary islands.

Worst of article: Gawdawful photo.

Best lines:

“There are some, indeed, round these parts who’d like the entire Pacific Northwest to break off from the rest of the US and go it alone” (some days, particularly during election season, I feel that way, too),

“Portland has the highest number of microbreweries in the world” (well, duh…).

Why do you like Portland?

Housing Wire reported Wednesday that a bill introduced in Congress would allow struggling homeowners to withdraw funds from their retirement accounts tax free to pay their mortgage.

Borrowers could pull as much as $50,000 from their retirement account or one-half of the current value of their account, whichever is smaller, and avoid the typical 10% tax penalty. The cap is a lifetime cap, and does not expire on a particular date. Borrowers are eligible to make multiple withdrawals until they reach the cap. The money must be put directly toward the mortgage within 120 days of withdrawal.  Jump to article

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HotPads.com, a national housing search engine, reported Wednesday in it’s June U.S. Rental Market Report that rental listing prices across the U.S. climbed 6.7 percent from June 2010 to June 2011.

Studio and five bedroom rentals experienced the most noticeable price hike, 14.3 and 12.1 percent respectively. This may indicate a growing demand for rental housing among first time renters and larger families. Built up demand for low risk housing may be due to financial uncertainty and a growing national sentiment questioning the future value of a home purchase.

HotPads.com created the graphs below based on the median listing price of 500,000 rentals across all major U.S. metro areas.

National Rental Data June 2010 – June 2011

Local markets differ.  What are you seeing in your area?

Data through April 2011 released today in the S&P/Case-Shiller Home Price Indices show a monthly increase in prices for the 10- and 20- City Composites for the first time in eight months. The 20-City Composite, which includes Portland, was up 0.66% over March 2011.

“In a welcome shift from recent months, this month is better than last – April’s numbers beat March,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the Spring-Summer home buying season. It is much too early to tell if this is a turning point or simply due to warm weather.”

Thinking about selling? Now is the best time in almost three years!

The major West Coast cities followed the national trend, led by San Francisco with a 1.70% increase and Seattle with a 1.63% increase over March. Portland rose 0.13% in April over the previous month.

A few weeks ago we broke out the neighborhood averages that contribute to the overall Portland performance in our post “Portland Home Value Changes Vary Widely by Area.”

We also demonstrated that non-distressed properties are performing very differently from the reported market averages in “West Portland Housing Stable Through April, Again.”

Call us at 503.222.3300 to learn your home’s value today!

And visit our Portland Home Team Market Data Center for more real estate information.

Today’s release of the S&P/Case-Shiller Home Price Indices for March, 2011 reported that the non-seasonally adjusted 20-City Composite Index declined 0.77% since February, falling to the lowest level seen since the national peak in 2006. Twelve cities, including Portland, fell to their lowest levels of the current housing cycle. Portland was down 0.7% from February 2011 and down 7.6% from March 2010.

Other West Coast cities fared a little better than Portland – San Diego, Los Angeles, and San Francisco suffered smaller drops, and Seattle rose a stunning 0.1% from February to March, one of two MSA’s to improve.

Last week we broke out the neighborhood averages that contribute to the overall Portland performance in our post “Portland Home Value Changes Vary Widely by Area.” The precise numbers differ because of differing methodologies, but the trends are similar.

We also demonstrated that non-distressed properties are performing very differently from the reported market averages in “West Portland Housing Stable Through April, Again.”

Call us at 503.222.4300, or visit our Portland Home Team Market Data Center for more real estate information.

Comparing the first four months of each of the past five years illustrates what many have sensed: the close-in West Portland real estate market has been relatively stable for some time.

Media reports headline city-wide averages that include distressed property sales – bank owned and short sale properties. According to RMLS data, West Portland home sales averaged 4.6% lower in price the first four months of 2011 compared to the first four months of 2010. Remove the distressed property sales, however, and the average sale prices even out for three straight years.

Other areas of town may have similar patterns. Call us if you would like to know what has happened in your area.

The total number of homes sold in West Portland has not been as consistent over the same time period. Particularly significant is the volatility of total sales of homes less than 2,000 SF in size, which include almost all of the Pearl District and South Waterfront condominiums.

Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.

Data through February 2011 show prices for the 10 and 20 city composites are lower than a year ago, but still slightly above their April 2009 bottoms. The 20 city composite, which includes Portland, was down 3.3% from February 2010. Portland was down 7.0% from February 2010, and hit a new low 28.3% below its July 2007 peak. The 20 City Index is 32.6% below its July 2006 peak.

California’s largest cities saw a continued slide from the interim recovery that began in Spring 2009 and peaked in July 2010. The San Francisco area, for instance, was down 2.6% from January 2011 and a whopping 40.5% from its peak in May 2006.

Case-Shiller reports on nationwide trends. Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.

The January 2011 RMLS Market Action Report released this afternoon showed mixed results in Portland Metro area home sales activity.

Portland area closed home sales were up 5% in January 2011 compared to January 2010, but down 29% from December 2010.

The average sale price of Portland homes was 11.9% lower in January 2011 than January 2010, and the median sale price fell 10.4%.

Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.

S&P/Case Shiller released the November, 2010 report Tuesday morning, repeating and confirming our earlier report that the average November sales price in the Portland Metro area recorded a one-month drop of 1.6% from October, 2010.

Of the Nationwide 20-city index, only San Diego had a gain (0.1%) in November; Los Angeles, San Diego, San Francisco and Washington D.C. showed gains in the year over year comparison (2.1%, 2.6%, 0.4%, and 3.5%, respectively).

While California appears to bring positive news, nine of the twenty cities hit their lowest levels since the 2006-07 peak, including Portland and Seattle.

Case-Shiller reports on nationwide trends. Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.