Friday, June 30, 2023

Clark County Dominating the Region

Parts of this article are excerpted from Urban Living in the Couv. The Columbian reported last week what commercial real estate professionals have been well aware of this year; Vancouver office space is actually in high demand, with vacancy in the mid-single digits compared to Portland’s double digit vacancy. It's more than 25% in Downtown Portland. But more interesting is the overall demographic shift since the 2020 census. Multnomah County has seen a drop in population of more than 20,000 residents as of the end of 2022 following several decades of strong growth. That’s a 2.5% drop in population in just 2.5 years. The interesting thing is that Clackamas and Washington counties have had flat growth. Washington County (Beaverton-Hillsboro-Tigard) lost a statistically insignificant 300 residents over the last 2.5 years according the Oregon State estimates and Clackamas saw a very modest gain of 0.4% over that time period. Clark County meanwhile according the Washington State estimates has seen a robust 2.7% increase in population since the 2020 census. Demand for commercial office space is high in Vancouver despite the national trends to contrary. Regionally all the residential energy is here as well from single family homes to high rise apartments and condos.

High demand for commercial space almost always has a positive impact on residential real estate in the area. Commercial activity tends to generate jobs and office jobs tend to pay well. With all the commercial construction going on in Vancouver jobs are also booming for contractors and trades people. Overall the local residential real estate market should remain solid. They days of 20 offers in ten minutes may have passed, but good healthy conditions should continue for the next 12-18 months or more if our economy can continue to grow.

Friday, June 16, 2023

Top Performing Real Estate Markets

 According to Zillow the hottest residential real estate markets in 2023 are expected to be as follows:

  1. Charlotte, NC
  2. Cleveland, OH
  3. Pittsburgh, PA
  4. Dallas, TX
  5. Nashville, TN
  6. Jacksonville, FL
  7. Kansas City, MO
  8. Miami, FL
  9. Atlanta, GA
  10. Philadephia, PA
That's interesting, but several other real estate prognosticators have their own top ten predictions and some of them have completely different cities. Hmm, that's interesting. Well different measurement metric I suppose. Locally Vancouver USA is looking solid for 2023 but not overheated like it was a couple years ago. At the entry level we continue to see sellers dominate but as you move up the price range sellers quickly shed their advantage and buyers enjoy the upper hand but he time you approach the $800,000 mark. It's purely a lack of inventory keeping the housing marketing on its toes. Should sellers suddenly get happy feet the market could succumb to downward price pressure and buyers could grab control of the market at large.

As I have reported time and time again, the Median Home price is not the definitive measure of market valuation changes. It is often an indicator of market movement away from high end transitioning to low end and vice versa. Trends right now are showing entry level home appreciating in the local market, mid range homes are somewhat flat, and high end home in excess of $1,000,000 are seeing downward pricing pressure.

Things look good here in America's Vancouver and if rate can stay stable at around 6-6.5% we should have a nice healthy and fair market for both buyers and sellers.

Friday, June 9, 2023

Assumable Loans and Pricing

I haven't heard this much chatter on assumable loans in my whole 24 year career :) But people sitting on an FHA or VA loan under 4% have an opportunity to sell their home at a bit of a premium. A $300,000 mortgage at 7.5% is about $2100 a month whereas the same loan at 4% is about $1500. That's a $600 savings per month. A buyer can overpay $10-$20,000 and still qualify if they are assuming a low interest note where they may not qualify at the higher rate.

I have a listing right now with a nice low interest FHA assumable loan on it. The problem however for assuming the loan is that it has a very low balance, well under $100k so most buyers will not have enough downpayment to make up the difference. But people sitting on a home they bought more recently say two years ago when rates were low, have a golden opportunity to cash in big now.

Generally FHA, USDA, and VA loans are assumable. Typically conventional loans are not. So a potential seller sitting on an assumable mortgage with a low rate under 4% might want to make a move up but is offset by the higher rates we have now. But if the loan they have is at 90% LTV or higher there is a good chance they can get an extra 10-20k over the value by finding a buyer interested in assuming their loan. That extra cash can be used to buy down the rate on their new loan for the next house. This is a good strategy but it should be noted that there is a limit to how much investors will let a borrower "buy down" on the rate. If they are a strong borrower with solid reserves and a high credit score maybe they get a rate at 6.50% and buy it down to 5.875%. 

Potential sellers should reach out to their favorite mortgage professional and discuss options like this to see if their scenario fits the model. It could be a great opportunity for both eh seller and the future buyer of their property.

Friday, June 2, 2023

Portland's Ritz-Carlton is nearing completion

The Ritz Carlton, Portland
I had the pleasure of attending a special broker event at the Ritz-Carlton construction site on Wednesday. The tower is nearly complete with the hotel portion expected to open this summer and the first units for the residential portion shortly thereafter. This is Portland's 2nd tallest residential tower with 35 floors and standing 460' tall, technically behind the 502' Park West Tower, but the two buildings have the exact same roof height of 460'. It is the 5th tallest building in the city. For comparative size Smith Tower is the tallest residential tower in Vancouver it has 15 floors and stands 158' tall and Kirkland Tower has 13 floors above ground and stands 146' tall. Needless to say the Ritz-Carlton in Portland is very tall. 

Although I do focus on urban condos, I tend to stay north of the Columbia River. But this project is offering new condos and as a licensed broker and can participate in sales. I have been very interested in this project as I feel it will be good not only for Portland but also Vancouver as well. Portland needs a shot in the arm to help boost its sagging reputation. It was not that long ago our southern neighbor was the national favorite for coolest city. But my things have changed haven't they? 

Vancouver has definitely done the opposite lately, with our previous reputation for a dingy Downtown, we have come screaming back with a vengeance and are actually the cool kid in the metro area right now. Although Portland's recent woes have translated into positive growth in Vancouver, its woes still affect all of us in negative ways and we all benefit from a better Portland. The Ritz-Carlton could ignite a new wave of positive change in Portland and that will radiate out to other areas in the region including us. This is an extremely high end real estate development with an estimated build cost of more than $600 million. The 138 condominiums will be priced well above the reach of even some affluent buyers, with prices starting at $1.6m and making their way towards $10m. The hotel however, will draw affluent guests to the region and some of the amenities in the tower, like the bar and restaurants will be open to the public. This is the second lifestyle condominium tower in the region, after the first, our own Kirkland Tower. 

Comparisons to Kirkland are inevitable but the two are as different as they are similar. The Ritz-Carlton hotel is about as good as it gets for luxury lodging. The Indigo Hotel attached to Kirkland is quite nice and the open atrium interior design is spectacular, but the Ritz-Carlton is top drawer. I'd give the hotel portion edge to the Ritz-Carlton. The overall owners amenities at the Ritz-Carlton are impressive edging out Kirkland but only just so. Kirkland's rooftop community penthouse, and patio area sits on the defacto 13th floor and is higher than the 8th floor "owners lounge" and patio at the Ritz Carlton.

The developer doing the Ritz-Carlton had one fully complete and furnished unit to show us along with several others in varying states of completion. The completed model was a two bed 1600 SF unit on the 21st floor. The unit was very nice and frankly I felt it was on par with Kirkland in terms of decor and quality, but not better. Quality of build is a tie between the two. One note however in favor of the Ritz Carlton is that the penthouses on the upper two floors are owner customizable. That is pretty cool.

View looking north towards Vancouver from 34th floor at Ritz Carlton, 5/31/23
An advantage to the Ritz Carlton is that all of the residential condo units are up top. Floors 21-35 are condominiums. The hotel occupies floors 8-20 including the flagship restaurant on floor 20. The lower floors are parking and commercial office space as well as restaurants on the ground level. Every single unit at the Ritz Carlton is high enough to see over the local buildings around it. So everyone gets a view. 

The higher floors at the Ritz Carlton soar above the city. Comparatively, Kirkland's units are effectively on floors 3-12. Now officially it's 2-11 but the first floor is a double height floor with a full mezzanine. Semantics, right? Kirkland units on the top four floors all sit high enough to see over neighboring buildings. It should be noted that Block 5 is not built out yet and a future tower there could potentially be as tall as Kirkland. All of the units facing the Columbia River regardless of floor have a view since the building sits on the Waterfront. But north facing units on the lower floors will have a classic urban view of the building(s) across the street. 

Kirkland in my opinion has the better location. This isn't a Vancouver vs. Portland thing, but just the fact the Kirkland sits on the Waterfront right in the middle of the hottest neighborhood in the metro area. Although the Ritz-Carlton is in a nice location in the West End neighborhood, it is not on the waterfront. Advantage Kirkland. Both locations offer connectivity to exciting attractions and things to do. Portland holds an advantage on music venues, sports franchises and such, but Vancouver's Waterfront is more walkable and park-like.

View from Kirkland Tower roof north towards Downtown Vancouver, 2021
I mentioned above that essentially all of the units in the Ritz Carlton "soar" above the city and that is true. The Ritz Carlton is the 5th tallest building in Portland and Kirkland is the 4th tallest in Downtown Vancouver. Relativistically they are in a similar position. But Vancouver's Downtown including the Waterfront is filled with mid-rise structures of 6-8 floors. Even on the rooftop at Kirkland you are not exactly "soaring" over the city but more like peeking out over the city. In fact I find that east facing units at Viewpoint have more of a soaring over the city feels since there are no tall structures on the Main Street corridor. That being mentioned, the airplane like view is more detached from the city. Sometimes its a bit more exciting being just a few floors above the fray and more connected to the urban space. It's a matter of preference really. 

Studies on the subject have shown that the best floors to live on are between 5-10. Why? Well the higher you go the less noise you have to deal with. The less pests (rodents, insects) and the more security and privacy. Let's not forget those views also. But above the 10th floor you are typically out of reach of local hook and ladder trucks so emergencies like fire, earthquake etc will require a manual descent. Also some people are height adverse so above the tenth floor can be uncomfortable for them.

So overall the metro area now has two premier lifestyle high-rise condominium developments to choose from. Kirkland has fewer than a dozen units remaining and I have little doubt the the Ritz Carlton will be successful as well. If I had to choose, I would of course stay here in Vancouver and go with the Kirkland Tower, but for the Portland fans, the Ritz Carlton is your new flagship residential high-rise tower.