Saturday, 16 May 2009

Where is Portland Oregon going?

Over last 10 years, Portland Oregon has enjoyed steady economic growth. In addition, it has also established leadership status in eco-consciousness, creativity and off-beat coolness. Therefore many creative types and IT folks has migrated to Portland and total polupation has increased by 14% from 1,936,110 in 2000 to 2,207,462 in 2008. Many of new residents are from California and, compared to San Francisco or Los Angeles, affordable real estate was great attraction.

However, Portland is facing major economic challenge right now as unemployment rate has doubled to 12% in March 2009.

I would like to introduce a couple of interesting article about Portland's economic challenges as follows.


'Youth Magnet' Cities Hit Midlife Crisis

  • As seen from below chart, Portland has attracted decent share of 25+ adults with college degree between 2005 and 2007.
  • This article focuses on challenging job market for young adults who moved to Portland.
  • I found it amazing that, while everyone laments about job situation but nobody says negative things about Portland. Those folks are having very difficult time keeping or finding good income job.

Metro Total Population 2005 - 07 Annual Migration Educated 25+ Share on Total Population
Cape Coral 590,000 3,564 0.60%
Sarasota 690,000 4,103 0.59%
Des Moines 560,000 3,132 0.56%
Charlotte 1,700,000 8,922 0.52%
Austin 1,650,000 8,448 0.51%
Raleigh 1,090,000 5,000 0.46%
Tucson 1,010,000 3,910 0.39%
Seattle 3,340,000 12,498 0.37%
Phoenix 4,280,000 14,103 0.33%
Portland 2,210,000 7,025 0.32%
Las Vegas 1,870,000 4,900 0.26%
Tampa 2,730,000 6,469 0.24%
Atlanta 5,400,000 12,397 0.23%
Riverside 4,120,000 9,198 0.22%
Sacramento 2,110,000 3,913 0.19%
Denver 2,510,000 4,624 0.18%
Kansas City 2,000,000 3,591 0.18%
San Antonio 2,030,000 3,639 0.18%
Houston 5,730,000 7,624 0.13%
Dallas 6,300,000 8,028 0.13%

Oregon Fail - Hard times for business and real estate out West.

This commentary has pointed out Portlant/Oregon's economic problem as follows:

  • Cost of doing business and regulation in Oregon is one of the highest in US. It is very difficult to compete against business-friendly states such as Texas and Idaho.
  • Oregonian priority is enjoying life Vs. growth -- therefore recession hit harder to Oregon than to other states.
  • Lack of economic diversity. Oregon depends too much on durable consumption goods such as lumber mills, semiconductor and motor coach.
  • Oregon once attracted IT business such as semiconductor. But, due to high cost of business, many of IT related jobs fled to other states and to Asia.
  • Because of skyrocketted real estate, middle class family can no longer afford housing in Portland. Expensive real estate made migration to Portland less attractive.
  • Increasing population has driven real estate construction and lumber business but those business are suffering now.
  • As much of business and migration was from California. California economy slump has caused severe dents in Oregon economy.
  • Outside of Portland, education level not so high. Low education employees job security is very shaky under recession.
  • Oregon does not have many large corporation headquarters. Therefore, when companies reduce headcounts, they tend to ax jobs in non-core locations.
I believe Portland Oregon is at cross road; 1) is it continue high-regulation, anti-growth, off-beat town or 2) does it totally change to pro-business / pro-development town with cheap real estate? It is important to note that, according to the success of Austin Tx, pro-business and affordable housing is what Portland is missing (maybe sunny weather too).

It is quite interesting to how Portland evolves!

Happy Investing!!!!

Short Sale is Getting Easier.

As I posted about tax and debt ramification on Short Sales in previous posting, lenders are more and more willing to getting Short Sales transaction completed before getting into foreclosure.

Up until last year, I did not prefer to be involved in short sale transaction because it takes too long time and you never know what happen until last minutes. Lendrs (or mortgage servicers) are much more motivated right now because:

1) When lender foreclose properties, it cost approx. 20-30% on property value due to legal, acquisition, holding and sales cost.

2) Lender do not want to increase foreclosed property holding (non-performing asset) as it looks really bad in balance sheet.

Therefore I have been dealing with 3 short sale transaction always (I only work on short sale transaction when I can work directly with seller and get cooperation from lenders).

Anyway -- I think it is generally good that short sale is getting easier as bank foreclosure create unnecessary vacancy and deterioration of properties. To foster this trend, Federal Government is assisting lenders (servicers) and borrowers by streamlining short sale procedure.

It looks like Government offer $1000 - $1500 to lenders and borrowers on successful short sale transactions. Nowadays, approx. 15 - 20% residential real estate transaction is short sales. I certainly see increase in short sales transactions for next 1-2 years.

This is great opportunity and happy investing!!!

Friday, 15 May 2009

Austin = America's Best Bargain Cities has ranked Austin as America's Best Bargain Cities by

Top 5 Bargain Cities are:

1. Austin, Texas

(Austin-Round Rock, Texas)

Cost of Living: 3 of 50

Housing Opportunity: 24 of 50

Unemployment Rate: 1 of 50

Average Salary: 20 of 50

© iStock

2. Phoenix, Ariz.

(Phoenix-Mesa-Scottsdale, Ariz.)

Cost of Living: 13 of 50

Housing Opportunity: 14 of 50

Unemployment Rate: 6 of 50

Average Salary: 21 of 50

© iStock

3. Washington, D.C.

(Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va.)

Cost of Living: 38 of 50

Housing Opportunity: 21 of 50

Unemployment Rate: 2 of 50

Average Salary: 4 of 50

© iStock

4. Fort Worth, Texas

(Fort Worth-Arlington, Texas)

Cost of Living: 16 of 50

Housing Opportunity: 10 of 50

Unemployment Rate: 8 of 50

Average Salary: 34 of 50

© iStock

5. Cincinnati, Ohio (tie)

(Cincinnati-Middletown, Ohio-Ky.-Ind.)

Cost of Living: 9 of 50

Housing Opportunity: 7 of 50

Unemployment Rate: 23 of 50

Average Salary: 33 of 50

© iStock

5. Indianapolis, Ind. (tie)

(Indianapolis-Carmel, Ind.)

Cost of Living: 13 of 50

Housing Opportunity: 1 of 50

Unemployment Rate: 17 of 50

Average Salary: 41 of 50

Happy investing!!!

Tuesday, 12 May 2009

Austin's Secret for Economic Success

Great article on Austin's secret for economic success and why you invest in Austin!

Reasons are:

- University of Texas (recession proof stable employment)
- Capital of Texas (Only blue spot in Red States)
- Hip Downtown (attract creative type)
- Affordable suburb (great place to raise family)
- Migration of college+ degree skilled workers
- Center of Taxas (low tax and low regulation)
- High-income high tech industory

Happy Investing in Austin!!!

Best Cities for Outdoor by

Annual ranking of the best cities for outdoor by

California rules!

1. San Francisco
2. San Diego
3. San Jose
4. Jacksonville
5. Tampa
6. Virginia Beach
7. Sacramento
8. Phoenix
9. DC
10. Seattle
11. Austin
11. Los Angeles
13. Mineapolis
14. Portland
15. Las Vegas
16. Miami
17. Denver
18. Atlanta
19. Kansas City
20. Boston

By the way, Detroit is ranked worst city for outdoor.

Happy investing!!!

Thursday, 7 May 2009

Negative Equity Continue to Grow - Q1 2009 Real Estate Index

Zillow.coom has introduced Q1 2009 Real Estate Index.

There are lots of data that show real estate price change such as Case-Shiller Index, Realtor Median Price data, FHFA housing index, etc... I really like this data as it give you 1) neighborhood/zip code based real estate data (location, location, location!!) and 2) negative equity data.

Here is the short-summary of Q1 2009:

- Zillow Home Value Index: $182,378(-14.2% Vs. Q1 2008)
- Total Real Estate Value Lost During Q1 2009:  $704 billion
- Percent of US Home Onwer in Negative Equity: 21.9%

Recently, media begin to quote optimistic news such as "worst period is about to be over" and "housing market shows some improvement." However, negative equity is the leading source of foreclosure and distressed sales, I firmly believe there will be continuous supply of distressed sales.

Zillow has also introduced MSA with the highest percentage of negative equity houses. You can imagine that, especially in these MSA, massive supply of foreclosed homes will depress the markets!

1. Las Vegas NV: 67%
2. Stockton CA: 51%
3. Modesto CA: 51%
4. Reno NV: 49%
5. Vallejo-Fairfield CA: 47%
6. Merced CA: 44%
7. Port St. Lucie FL: 44%
8. Riverside CA: 43%
9. Phoenix AZ: 42%
10. Orlando FL: 42%

To summarize, it is true that worst depreciating period is about to over. However decline of property value will lead to walking away, foreclosure and eventually distressed sales. You will have more time to evaluate when you should start bargain hunting, especially above mentioned MSA.

Happy Investing!!!

Monday, 4 May 2009

Japan tops Global Innovation Index

Economist had introduced a new ranking of the world’s most innovative countries.

Here is the ranking. Advanced countries so far dominate the ranking.

But China/India is advancing rapidly.

Just FYI --- Happy investing!!!

Saturday, 2 May 2009

Sign of Recovery in Las Vegas and Phoenix?

Las Vegas and Phoenix is the poster child of US housing bubble, driven by migration of priced-out Californians, baby boomers retirement and speculation from "California Investors". Based on Case-Shiller Index, their real estate price index has peaked around 225 in mid-2006 (2000 = 100).

However, Las Vegas and Phoenix property value has gone down to 2002/2003 level in Feb 2009 --- decline of -45% and -50% respectively!

Scott Sambucci, VP of Altos Research, has posted very detailed analysis of Las Vegas and Phoenix market in his blog as follows.

HOSING IN LAS VEGAS - "C'mon Black!"
- Inventory has been stabilized at around 16,000 for a while.
- New listing and Absorbed transactions are balancing.
- Median sales price has gone down from $350,000 to $144,000 but it is still falling.


- Median price has been stabilized around $105,000.
- Absorbed transactions has exceeded new listing (sign of seller's market)
- New listing median price is 10% higher than absorbed median sales price (on average, new listing is absorbed at 95% of original price in Phoenix).
- Bottom 25% priced propertie's transaction is booming.

I believe Phoenix's housing market is faring better than Las Vegas's because 1) lower median price (= better rental yield) and 2) low unemployment rate at 8% range (Vs. LV's 10+%).

Having said that, I do not think there will be rapid recovery for below reasons:

- As FTHB (First Time Home Buyers) represents 50%+ of total transactions, there are limited number of FTHB. In addition, $8000 credit for FTHB will expire on Nov 2009.

- Lenders are accelarating foreclosure activities once government moratorium was lifted.

- Massive Shadow Inventory -- Bank has foreclosed quite lot of properties but have not sold them for some reason.

Lastly, it is my opinion that real estate price in Las Vegas and Phonex will continuously stagnate because 1) their demand is driven by cash-strapped retirees, 2) their job growth are concentrated on low paying manufacturing and service/tourism related positions. I do not see any indication of household income improvement nor migrations of high-income "creative types."

How the Crash Will Reshape America?

Happy Investing!!!!!

P.S. Follow me at Twitter -

Friday, 1 May 2009

Before you do Short Sale...........

As many of you know, short-sales is the transaction that existing lenders approve sales of the property at the price below mortgage principal amount.

As lenders are more and more motivated to sell the property (rather than foreclose one), I have been engaged with quite lot of short-sale transaction helping my clients purchase properties at significant discount.

However, what I have found is that, since most of sellers and seller's agents, do not understand how short sales works, I ended up doing negotiation with lenders by preparing necessary paper works. This is time consuming but I realized huge opportunity in short sales.

Anyway, especially for seller, it is quite important to understand how short sales works in terms of tax and unpaid debt amount.

Here is the article from Wall Street Journal about "A Short Sale May Not Mean You're Home Free." This article features that many short-sale sellers are hit outstanding debt lien after the short sales. If you owe $150K and sell property for $100K having lender each $50K, the lender often press lien against you for unpaid $50K. This is particularly true if your home is refinanced or is investment property. It is important that you do your best to have your lender agree on Deed in Lieu and have them forgive the remaining debt.

The below article about tax ramification when your remaining debt is forgiven. In this case, the lenders are required by the law to file DDI (Debt Discharge Income) via Form 1099-C to borrower. This means borrower, in IRS' eye, made income at the amount of forgiven debt. If you seller primary residence, DDI is forgiven by tentative relief. But if it is investment or cashed-out-primary residence, DDI is full in force. In this circustance, you have to somehow prove that you are insolvant.

This is down-and-dirty financial and tax tip for short sale seller.

Happy Investing!!!


Contact me if you are interested in buying severely discounted property with Short Sales.

Follow me on Twitter at