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Sandy's housing market BUILDING momentum


This year city officials expect to see first increase in construction permits since 2006

It’s almost as rare as a Bigfoot sighting: There are crews actually building new homes in Sandy. by: POST PHOTO: NEIL ZAWICKI - POST PHOTO: NEIL ZAWICKI Ricardo Portillo, Miguel Florez, George Teeter and General Contractor Mike Smit raise a wall Friday afternoon while building a new home in Sandy. The home is under construction by J&M Builders.

For the first time in seven years, the city of Sandy Planning Department expects a rise in residential building permits, and mortgage brokers are officially declaring a seller’s market.

Yes, Virginia, there is a housing market.

Robyn Jones is a broker with John L. Scott Real Estate in Sandy. She said her business has changed for the better in the past year, and she points to the new home activity as the cause.

“When new construction comes back, that’s a big thing,” Jones said. “Everything follows. And I mean everything.”

Housing starts, the favorite barometer for economists, is the indicator for general economic health. For this reason, Jones’ “everything follows” comment is accurate. And on a supply and demand level, she said people are lining up for anything offered.

“What we’re finding is that the day a new property goes on the market, we are seeing multiple offers,” Jones said. “So we’re seeing it transition into a seller’s market now. We’ve been in a buyer’s market since 2007.”

Jones said the spike in demand makes it a bit sporty for anyone hoping to land their perfect home.

“It’s very challenging,” she said. “My buyers really need to listen to me when I say we have to jump.”

How does she know?

Jones points to an industry formula for determining inventory. It works like this: Market inventory is represented by a given month’s supply of homes for sale, divided by the number of homes sold in the previous month. A five-to-six month supply of homes creates a balanced market, with home values appreciating. A seven-to-eight month supply creates a buyer’s market with depreciation.

“Right now, we’re down to one or maybe three months inventory on the market,” Jones said. “Appreciation is happening. It’s a great time for both buyers and sellers.”

The low inventory of course gives builders the confidence to get back to work. Noryne Robinson is a permit technician with the city of Sandy. She said the expectation is for increased building activity in 2013.

To put it in perspective, there were 193 residential building permits issued in 2006. The next year, there were 150. Then, in 2007, only 77 permits were issued. That number dropped below 47, and hit the lowest at 32 for both 2011 and 2012.

This year, there are 12. So far.

“We project it to be higher than the last two years,” Robinson said. “I think they’re being really cautious right now, But I think we’ll beat 2011 and 2012 for permits.”

In fact, Jones said she’s aware of developers with plans to build 40 homes this year.

“Historically, we see a lot more inventory come on in the summer,” Jones said. “Right now, the inventory is so low, that what I tell my sellers is if we can get underneath that, it would be a great time to sell.”

Time to sell? Maybe.

The new construction indicator and low inventory might excite some who have been waiting for the right time to sell their home, but the game is different these days. Unlike the pre-collapse era, new regulations are in place, so it might be wise to hold off on the celebration cigar.

“The appraisers are still controlling the market,” Jones said. “They have very strict guidelines now. Back in 2006 and 2005, the appraisers would value the property at whatever we needed it to be.”

Jones said now anyone who’s hoping for financing will only get it if the home appraises at the same value as the loan.

“We had one last week that didn’t appraise out,” Jones said. “There has to be three comparable properties in the area that match the appraisal.”

This new rule affects new home prices as well. When builders set values, they take the appraisals into account.

“Once they sell that first home in the development, that will set the tone for the whole subdivision,” Jones said. “They will not bring the price down on that first home, and the thing is that they don’t have to.”

Another lesser-known part of the game in the Sandy area, said Jones, are United States Department of Agriculture loans, which require no money down. These are loans designed to encourage buying in rural areas.

“It’s probably 90 percent of the type of loan that I use,” Jones said. “Also, the mortgage insurance is very minimal, so that takes the cost down. It literally can be a 100 percent financed loan, if we get the seller to pay the closing costs.”

John Mayer, a senior loan originator with American Pacific Mortgage, agrees the USDA route is a good option for buyers interested in the Sandy area. They represent about 40 percent of his business.

“It’s one of the few products left, barring a VA loan, that offers no money down,” Mayer said. “I think a lot of people thought those types of loan products went away after 2008. The USDA product is a good opportunity to be able to qualify for more of a house, if you meet the qualifications.”

To qualify for a USDA loan, a buyer needs a credit score of 620 or better, and make less than $83,950 per year. These, as well as conventional mortgages, are gaining ground over short sales, which were the business standard for the past few years.

“Short sales were easily 50 percent of my business,” Jones said. “Now they’re about 20 percent.”

Still, Jones cautions that short sales are going to be around for a while.

“It’s all judicial foreclosures now,” she said. “Even though they say foreclosures are down, people are going into foreclosure every day.”

Jones said 192 homeowners in Clackamas County were served a foreclosure notice this year, as of April 11. What they get now is called a Lis Pendens notice.

“These people are no longer getting a notice of default, they’re getting a notice to appear in court,” she said. “But there is still time in most of these cases for us to do a short sale for them. The banks would rather have us complete these short sales than to take the property.”

Another curious harbinger for the market, Jones said, are the volumes of bank-held properties yet-to-be returned to the market.

“They’re holding on to thousands of properties right now, so that they don’t flood the market,” Jones said.

All of this is good news for home builders and sub-contractors.

Ed Matson owns Four Star Plumbing, a commercial contractor. He and his apprentice, Nick Costello, were busy installing pipe on a new home Friday.

“Pretty much since this time last year we’ve been steady,” Matson said. “But after 2008, it wasn’t so much. New home work has picked up since a year ago.”