Mt. Hood and Portland skyline - courtesy C.J. Peters

The Oregon Employment office gives figures that show that there could be over 200,000 new jobs created in the Portland area  by the year 2020. Portland has also recently seen an economic growth rate of 7 percent, while the rest of the country has been buried deep in the recession. The economic problems of California has caused many blue-chip companies to relocating to Portland and there is a feeling that this area may actually become the new Silicon Valley. As you can see, Portland is emerging as a new and powerful housing market too.

Its close proximity of the ocean has helped Portland gain a reputation as a friendly and active town. Water sports have a way of doing that to a place after all. Entertainment in Portland too, is about as diverse and eclectic as you can imagine, and everything from shopping to ski resorts are only minutes away.

A bit of paradise at Gold Beach - courtesy Oregon & Washington Real Estate

During the winter you can enjoy the numerous Winter sports resorts  to be found close by. And for those more inclined to shop until they drop, Portland has shopping malls, cafes, boutiques, fashion shops, department stores, eating venues, and other all day buying opportunities to match any major city in the world. For the indoor or outdoorsman, Portland offers the gambit of activity, take in the Zoo, or enjoy the 3D center for art and photography, the city has its share of everything cultural and action packed. And in terms of American history and culture the center for art and photography is a unique museum and features photography technology that goes all the way back to the civil war and compares them with those found today.

Two bedroom Ambassador Condo at city center - courtesy Washington & Oregon Real Esate

The commercial and business real estate advantages of Portland are fairly obvious. But, purchasing residential real estate in Portland as maybe even more dynamic a market. One reason for the city’s appeal is those multitude of activities and amenities mentioned, but another is the pictureque beauty of the place. Portland is actually a stunning city to live in. Where the wilderness, meets cosmopolitan life, and then both these meet the Pacific Ocean – well, the combination is quite stunning. But there is more, much more….

Portland is truly one of the greenest cities in the United States. Besides being considered one of the most environmentally friendly places to live, and the aforementioned grandeur of the place, the City of Roses has an indiscernible character only the residents there can describe. A shining city at the confluence of the great Willamette and Columbia rivers, Portland is and always has been a great place to live, work, and play.

Chic condo overlooking the park - $377,000 - courtesy Oregon & Washington Real Estate

For most investors or even potential home buyers though, the prime mover for buying in Portland is going to be value. And in the end, because of all the factors listed – on top of fantastic price drops in the city – there may be no better “buyer’s market” than Portland, Oregon. In a recent article at Seeking Alpha, Leith van Onselen uncovers the grissly truth about the US housing market, not too many want to acknowledge.

Aside the greater implications though, this report reveals Portland as a veritable “blue light special” where quality location rests atop home price. Of particular note here, since October house prices in Atlanta, Charlotte, Miami, Portland, Seattle and Tampa have fallen to their lowest since the big recession began. If there ever were an “up” side, to an economy on the “down” side, superb real estate that is affordable is it. JMA Properties’ website offers a nice view of what is available on the Portland market.

Red Bull comes to Portland - courtesy Dan Klimke

For most people purchasing real estate in a down or stagnant market is a good idea. However, you need to figure out a strategy and feasibility study before making any investment decision.

For the prudent investor the more information you have, the better the decision outcome for your home purchase plan. For some good advice on buying during a depressed housing market, this article has some crucial hints. When considering buying a new home in a “buyer’s market”, here are a few more things that should be considered.

• Figure out is how much money you can save by selling your current home in order to look for another in an area that has a down market. With proper research, and even using the help of a real estate agent, you can easily come up with a number of options. A real estate agent understands the markets and can help you make this difficult task quite easy. An agent will also be able to advise you on whether it is a good idea to buy a new house or keep the current one given all the variables.
• Secondly, consider the prevailing interest rates and the current movement trends. If interest rates are heading towards an all time low, then it is a good idea to prepare to purchase when they hit the bottom. This will end up saving you money in the long run. Buy a house when the interest rates are low if at all possible.
• The location of the home is another important factor to consider. You may feel reluctant to relocate, but if the location of the home is in a down market is worse than in your current location, there is a trade off to consider obviosly. Generally speaking, neighborhoods do not change so much that a great deal now means a big profit later. Consider the area with close scrutiny to avoid the pitfalls there.
• Get a professional home inspector to go over the house and ensure that it is in a good habitable condition. If you purchase a house that will start requiring serious repairs, then it may end up costing you ore in the long run. The few hundred you spend paying for an inspection, could save you tens of thousands.
• Do not forget to go over the legal aspects of the purchase. Get a real estate attorney to ensure that you are in compliance with the laws associated with the purchase of the home, even in a down market. He can help you negotiate with motivated sellers so that you do not end up looking like you took advantage of their situation, from a legal stand point, in order to buy the house at a low price.

There are more factors that you should consider when buying a home in a down market, but these are the most basic. Buying a new home in during such economic times, even in a bullish buyer market, should be approached carefully and meticulously. Buyers can get a very good deal in this market, even gaining entry to houses they may not have dreamed of buying, but there are stumbling blocks as well. Do you research and be prudent.

A buyer's market does not mean "buyer beware" - but there is reason for concern

For more detailed information about how your best moves toward homeownership, consult the HUD site here,  CNN Money, and the home buying tips section of Century 21. Your local real estate agent index will also render great resources to assist you.

A happy couple making decisions the right way - courtesy brennaval

Closer to the Cradle

Young people today are getting  used to setting up savings plans for their down payments when purchasing a new home. While being able to evaluate one’s capacity to be disciplined enough to follow through, this too is a weapon in the arsenals of many couples just starting out. If there is one positive impact the recession has had, it is in solidifying some of these ideas in the minds of newcomers to real estate planning.

Each generation, the age at which young people enter the housing market gets lowered. This is because there has been an increase in the earning capacity of most individuals coupled with more lenient lending requirements. In the past it would have taken many years of disciplined effort to save enough money for buying a home. Nowadays, people in their twenties are earning enough to meet this requirement fairly quickly. This is a good thing, but there are shortcomings obviously.

Global interest rates are lower than the interest rates available a generation ago, which has had the effect of increasing the buying power of many young professionals. Younger professionals can now qualify for a residential mortgage because low interest rates have allowed these professionals to service a monthly mortgage payment as it now comprises a smaller percentage of their annual income.

Mortgage interest rates have also fallen considerable compared to the levels they had attained a few decades ago. They have fallen by more than 50 percent over the years. Considering the higher incomes earned by young people today, it is so much easier for them to meet monthly mortgage installments than it would have been in the past. This has also meant that they are able to buy much more expensive property than they would have been able to in the past.

More Factors Than You Can Shake a Stick At

The high levels of liquidity in the economy today have led to banks and mortgage lenders competing to give out loans for the purchase of homes. Their lending procedures have relaxed with time. It is even possible to walk in and get a pre approved loan if you have an outstanding credit history. You can apply for a mortgage and get it approved in a few days after the lender has analyses your capacity to service the mortgage.

Landlords in the recent past have started charging higher rents in an effort to meet taxes, utilities and other costs associated with owning an apartment building. Tenants on the other hand are beginning to understand that the rent they pay could easily be used as mortgage installments and the difference will be that they will be gaining equity in the house as the years go by, unlike when they are renting from someone else. This has led more young people to look for opportunities to take out a mortgage and own a home.

Buying as opposed to renting is the prudent path, particularly in this buyer’s market. But the critical issue for any age buyer is ensuring their ability to pay the bills through thick and thin. This should be abundantly clear since the events of the last three years. Search and gain access to the house you can afford first, then make it into your dream home.

Easy money is not always the best bet

There was an excessive supply of money at the beginning of this trend. Mortgage lenders and other investors were willing to give out loans to just about anyone in the hopes of gaining explosive marginal gain. The process of analyzing financial status was lax and you could get a loan for a house with no income at all. Since the crisis, banks and mortgage lenders have tightened the purse strings and your credit history and current financial standing is critical to having a mortgage pre-approved now, but during the boom basically anyone could get cash for a house.

Before taking out a mortgage to buy a house, self evaluation is important in guaging your household’s ability to service the mortgage without really straining your resources to the breaking point. This is the biggest single reason so many people are in foreclosure right now. Using the excuse that Wall Street caused your situation just won’t fly.

Even if a mortgage lender approves your application with only a 3 percent down payment, you should make sure that you have saved enough to manage the usual 20 percent down payment requirement. Monthly installments will be less and you will not strain to make other ends meet nearly as much as if you stress your limitations. It may mean that you have to wait a little longer before you can buy your house as you save more for the down payment, but it will also mean that you are better positioned to service the mortgage without a lot of stress.

The housing market was destroyed by bad practices

Some lending institutions will insist that you have a financial reserve deposited with them so that you can still service your mortgage should the unexpected happen and you find yourself temporarily unable to bring in an income. However, even if you get a mortgage from other institutions without such a requirement, you should make sure that you have a cash reserve saved up in an account to serve the same purpose. This will go a long way to gibe you peace of mind if you ever find yourself in such a situation.

Getting a home is not just about buying the structure; you should take into account other costs associated with purchasing a new home. You will need to furnish it to make it habitable for you and your family. You will also need to take into consideration the costs of maintaining the house.  How much will it take to buy beds, seats, and a play house for the kids in the backyard etc? Should you need to redo the plumbing, how much will the plumber ask for his services?

Image credits - © pojoslaw - Fotolia.com

Take an honest look at how much liability you have. Do you have a car loan? What is your monthly credit card bill? Your total debt load will have a huge impact on how you service your mortgage, so before you even consider applying for one, look for an accountant who can help you work out the numbers and advise you on whether it is a good idea to buy a house now.

You may have to wait a little longer to purchase your home if you follow these best practices, but if worse comes to worse your situation will not be nearly so dire. In the end, owning your home is the goal, and having it repossessed will take you years to overcome. The old saying “an ounce of prevention is worth a pound of cure” has taken on new meaning since the economy went South.

Home values began steadily plummeting in mid 2006.  According to the Fiserve Case-Shiller index, the median price of houses fell by 27% nationwide since the decline started and reached 30% in 2010.

These declining home values left many homeowners stuck underwater. Many of them currently owe more on their mortgage than the market value of their homes. This situation has left tens of thousands of homeowners in a dilemma, they cannot sell their houses for a good price and they cannot move. They can stay put and wait until the market regains impetus and investors gain confidence or request permission from the lender to make a quick sale. In the worst case scenario, they will be forced to default on the mortgage and the property will get repossessed. This is a story that is repeating itself thens of thousands of times.

What will $1000 a month buy now? Hardwood and luxury?

On the positive side of things, many homeowners are now upbeat about the recovery. Some have opted to pay extra on mortgages and second mortgages anticipating for debt pay down and home price growth convergence sooner rather than later. There is also the aspect of pride whereby most folk prefer to pay extra rather than loose their much valued properties. Of course pride only goes so far when people are left facing that place where ends meet.

Recent activity in the real estate market has brought a glimmer of hope for homeowners and real estate investors. Mortgage interest rates are at their lowest values in 60 years. This creates tremendous opportunity to buy even in areas that were once considered out of reach for the average investor or homeowner. The government has also been forthcoming, offering loans and tax benefits to bolster investor’s confidence in the real estate sector as well.

The prudent buyer will smell like a rose in the upturn

Short sales and foreclosures have been the main cause of the decline in home prices in the past few years. In fact, they accounted for about one third of home sales in 2010 with an average discount of 26% for most homes. These discounted sales are expected to continue in 2011 but with varying capacities. Currently, there are millions of delinquent loans being worked out by lenders. Most of these are headed for either short sale or foreclosure.

Delinquency is estimated to peak in 2011 and given the laws of supply and demand; it might take a few more years to even things out. According to economists, the longer the foreclosure process drags on, the greater the backlog of properties and the more they will continue to suppress prices when they are put on the market.

The worst case scenario for home values in 2011 will be stagnated or stunted growth in the economy and increased unemployment rates. These two factors are likely to increase the number of houses under foreclosure and further push down home prices. In such a market, investors will be scared of spending and therefore dampen further economic growth and job creation.

Nonetheless, there is still reason for optimism in the market. With few exceptions, the real estate market is fairly undervalued with regards to the relationship between home prices and income to apartment rents. Since some home values are actually undervalued, they are likely to attract prospective buyers and real estate investors when the market begins its path to recovery. The message in the housing market is obviously still, “buy if you have the cash” it’s definitely a buyer’s market.

7 bedrooms and a football field yard - from Realtor

As an illustrative, a buyer who may not have been able to afford 4,000 square feet and 7 bedrooms in a prestigious neighborhood in North Georgia for instance, may be with the reduced price on a home like the one at 23 Attaway Drive there. The images above show a custom home with space galore inside and out. Gourmet kitchen, professional grade appliances, library, elevator, lots of living space and a widow’s walk on the top floor with panoramic views. Under $400,000 puts a luxury space for a family well within reach. Note this is the “asking” price.

Regardless of whether you are a homeowner or a real estate investor, interest rates are affected by a variety of economic factors that can have a huge influence on current rates. It is important that you understand these factors in order to decide on obtaining a Fixed Rate or Adjustable Rate Mortgage to purchase a home or to refinance an existing loan.

Freddie Mac and Fannie Mae loans

Generally, mortgages are originated by Banks, Credit Unions, or Mortgage Brokers. Amongst fierce competition, these lenders constantly compete against one another in order to obtain a stronghold within a given region or national marketplace. Lenders compete based upon interest rates, service fees, and customer service, but it is the spread on interest rates and service fees that contribute to the profitability of the lending institution. Given the risks of most funded loans, many lending institutions do not even keep the loan on the books. They simply sell the loan on the secondary mortgage market at a discount.

Secondary markets are generally known as aggregators, but loan originators and lending companies can also act as aggregators as well. Generally, these companies pool together mortgages from different borrowers and build secure accounts called mortgage backed securities. Mortgage backed securities are bonds backed by a pool of mortgages and then sold off to other investors. Mortgage backed securities are priced then priced and sold off to investors. The pricing determines how much can be spent on newly originated loans by lenders.

Understanding mortgages helps you and the industry

This in turn affects the interest rates charged to consumers on new refinance loans. If this sounds a bit confusing, it actually can be, but the principle is pretty simple – your actual loan will likely end up owned and managed by a firm you never heard of. But more importantly for the overall economy, if something goes wrong across the breadth of a market, those securities become highly volatile and sometimes even worthless, ergo our current economic situation. But that is a subject for another article.

Hence, mortgage backed securities are held in the form of Bank Investments, Insurance Companies, Pension Funds, Private Hedge Funds, Foreign Investors, and Government Real Estate affiliates: Freddie Mac and Fannie Mae. The level of demand for mortgage backed securities determines their price in the market. Investors looking for good returns will regularly compare these securities with other investments that provide income such as Government and Corporate Bonds.

In order to trace the source of interest rates charged for mortgage loans, you must follow the chain from borrower to securities investors. The mortgage loan process ends with an investor purchasing mortgage backed securities from a secondary mortgage dealer. It is therefore safe to assume that the investor, to a large extent determines the interest rates charged to clients.

Clearing prices for mortgage backed securities are originated in the free market for any willing investor. These prices run up and down within the mortgage industry and finally dictate the interest rates given to credible borrowers.

The Federal Reserve also plays a role in interest rate increases. They normally set current short term interest rates for securities such as the yield on US Treasury 10 year bonds. The bonds market normally reacts according to the Federal Government’s control of short term interest rates. It is common knowledge that interest rates on 30 year Mortgages are related to Treasury 10 year bonds. Speculators therefore keenly watch the yield on the Treasury bond and compare it with Federal Monetary policies in order to forecast how interest rates are likely to perform in future.

Nebulous terms and what it all means to you - courtesy Goals for Americans

Overall, there are numerous factors that come into play when determining interest rates for mortgage loans. If you take the time to conduct your due diligence and learn about the economic factors that affect interest rates, you will be well on your way to acquiring a mortgage loan that is right for you. And what’s more, the better educated people become about how these systems work, helps individuals, even homeowners in general, avoid the pitfalls of ownership and investment.

If every investor had listened carefully to the eHow tutorial below before the investment world put tens of billions in mortgage backed securities before the meltdown, America would be in far better shape. The video also gives you more information about how these “instruments” work.