I went to hear the Oregon Symphony over the weekend. My main reason for attending this concert was to hear the Mahler Fifth Symphony. However, it also turned into a serendipitous encounter with another great living musician.

I had heard Alban Gerhardt play with the symphony a few years ago–it was not necessarily a memorable occasion; I don’t even remember what he played. This time he played the Haydn C Major cello concerto–a piece which remained hidden in the archives for nearly 200 years. It is a delightful work, full of joy and levity. The conductor Carlos Kalmar took the final movement at a roaring clip and Alban didn’t flinch on the dazzling runs up and down the finger-board. I watched the movements through the binoculars from my seat in the last row of the Lower Balcony section (i.e. ‘nosebleed). But the sound of the cello does not carry like a piano or trumpet so I didn’t feel I was getting the full impact of his playing. It was fun, it was thrilling and it brought the audience to its feet demanding at least three curtain-calls. (I wish he would have played an encore!)

On Sunday Alban Gerhardt performed in a more intimate setting at the German American Society building which happened to be just 10 minutes from my home on Rocky Butte in NE Portland. So, eschewing an afternoon with the NFL, I drove down to hear him again. Here, the moment his bow touched the strings of his Matteo Gofriller cello, the room fill with the warm, muscular sound of his instrument . No straining to hear the nuances of the undulating sounds and textures of Bach. This had been advertised as an opportunity to hear some of the Bach suites for solo cello. But Alban didn’t stick to the script in a conventional fashion–he called for the audience to suggest any of the 36 movements from any of the six suites . . . which he proceeded to fashion and play as his own ‘suite’. It worked! He rounded out the recital with an amazingly virtuosic performance of the finale from the Kodaly Sonata.  Here’s a performance by the late great Janos Starker.

The event was promoted as ‘German-speaking’ but the audience was mainly non-German. So Alban spoke in flawless English as a musician, entertainer, and educator. He was spot-on as a great communicator. And, as any good speaker should, he made points and told stories.

There was the story his playing ice-hockey for four hours as a high-school student (on a frozen pond near his home in Germany) right before a concert where he was scheduled to perform the Haydn concerto with an orchestra. His arms were so tired, he could hardly lift up his bow. Or the time Paul Tortellier asked him to leave a master class because he thought he was being ‘cheeky’ and making fun of the master. (In fact, it was the other students who were mimicking Tortellier’s teaching style). (‘Paul Tortellier was not a great, natural performer–he had to work at it–which made him a fabulous teacher’).

Alban talked about the time he played on BBC Radio when he was not fully prepared. He had missed some practices and was very nervous before going ‘live.’ Then in the middle of a Bach suite, he forgot his place and started the wrong movement . . which he corrected before wrapping it up. He was embarrassed and afraid of what the producer (a good friend) would say. It turned out that the audience loved his playing–he received more e-mails after that recital than any other. They liked the fact that it was ‘real’, that it was not just a memorized, crafted performance.

Alban Gerhardt is not only an extraordinary musician and performer, he is also a gifted artist who lives in the moment. Music is not just a career or pedestal–he lives, breathes ands exudes his artistry. Oh, about that Oregon Symphony concert the other night–when Alban had finished his role as featured soloist in the Haydn, he didn’t retire to the green room or his hotel suite. He returned for the second half to play as a member of the cello section in Mahler’s Symphony No. 5. As he said later, ‘The Haydn is a nice piece that you can hear anytime. But Mahler? Now that’s something you don’t want to miss’ even if it meant–in his case–that he was just sight-reading!

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Warren Buffet on the Housing Market

I was reading  Berkshire Hathaway’s Annual Report this morning which includes comments from it’s Chairman,  Warren Buffet.  Sometime called the ‘Oracle of Omaha’, Buffett is almost certainly the greatest investor in this country–his company has averaged a return of nearly 20% per year for the past 47 years!  When this man speaks, it’s worth listening.  Here’s his take on the U.S. housing market:

Housing will come back – you can be sure of that. Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies). For a period of years prior to 2008, however, America added more housing units than households. Inevitably, we ended up with far too many units and the bubble popped with a violence that shook the entire economy.

That created still another problem for housing: Early in a recession, household formations slow, and in 2009 the decrease was dramatic.  That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.

At our current annual pace of 600,000 housing starts – considerably less than the number of new households being formed – buyers and renters are sopping up what’s left of the old oversupply. (This process will run its course at different rates around the country; the supply-demand situation varies widely by locale.) While this healing takes place, however, our housing-related companies sputter, employing only 43,315 people compared to 58,769 in 2006. This hugely important sector of the economy, which includes not only construction but everything that feeds off of it, remains in a depression of its own.  I believe this is the major reason a recovery in employment has so severely lagged the steady and substantial comeback we have seen in almost all other sectors of our economy.

Wise monetary and fiscal policies play an important role in tempering recessions, but these tools don’t create households nor eliminate excess housing units. Fortunately, demographics and our market system will restore the needed balance – probably before long. When that day comes, we will again build one million or more residential units annually. I believe pundits will be surprised at how far unemployment drops once that happens. They will then reawake to what has been true since 1776: America’s best days lie ahead.

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Portland Homes Sales Update

The new numbers are in for May 2011.  Generally, there were no surprises; prices trended down from a year ago though closed sales were down 15% from 2010.  Remember that last year we had the surge of sales activity through April due to the homebuyer tax credits.  That, in turn, led to a lull in sales through the summer. 

What I do see is a pickup in activity (Pending sales are up 45.1% from May 2010) as lower prices combined with low interest rates have helped qualified buyers make a move.  We also see that reflected in lower inventory numbers (6.8 months).  Good homes in the area surrounding our office (NE Portland) which are well-priced are receiving multiple offers and selling quickly.  It has also remained the strongest area for sales with only a .9% decline in prices from a year ago vs a 4.8% decline for the Portland Metro area.

There are still severe challenges in the whole home-buying process.  We like to say (only half-jokingly) that we spend most of our time just keeping transactions together where a few years ago, the process was often on auto-pilot.  Just this week, I had an appraisal come in more than 5% below the contract sales price!  On a different transaction, the lender would not accept a cashier’s check as an earnest money deposit from a buyer!  A normal 30 – 45 day closing on a bank-owned purchase is closing this week after nearly 90 days!  So every one of these issues requires time, patience and higher skill level to bring a sale to completion.

The complete report has more of the market details.  The good news: interest rates have trended back down, it is a good time to upgrade to a nicer home and Portland is still an attractive location for people from all across the country. . . . though they may not buy right away!


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Appraisal Surprise II

In my last post, I described a transaction where the lender required a second appraisal.  The result compelled the seller to reduce the price by $15,000 with my buyer as the beneficiary.  The other recent appraisal ran a different course.

This time the property was  a bank-owned home in North Portland which had a lot of promise but also some potential pitfalls.  The home was in a good location on an extra-large lot; in other words, an attractive property.  However, there were some cosmetic issues which concerned me: broken drywall, grafitti, missing bathroom fixtures, and a questionable roof. 

Even if the buyer is satified with the property, there is still the appraisal to work through.  The appraiser’s job is to determine the value of the property but sometimes that valuation is conditional; it requires some repairs in order for the property to appraise at the necessary price.  The appraiser can flag a property for safety issues (exposed wiring, missing outlet covers), functional issues (missing sink or toilet), or repair issues (life of the roof, broken windows, dry rot).  Sometimes repairs will need to be completed before the appraiser signs off on the valuation, a tricky proposition on a bank-owned property because they don’t like to do repairs. 

On a purchase last year, the appraiser made his report conditional on the garage being repainted with new gutters installed.  This was on a property where the garage really had ‘no value’ since it was already leaning and about to be torn down–it would have been a waste of money!   But there was no negotiating with the appraiser; he was sticking with his report.  Fortunately the seller was motivated enough to go ahead and ‘repair’ the garage . . . which my client tore down a couple of months after closing!

In the recent case, my buyer was satisfied enough with the property after all the home inspections to proceed with the purchase.  However, I was concerned enough about the appraisal to put together a back-up plan: converting to a ‘Renovation Loan’ .  This would mean additional fees for my client plus a lot more paperwork involving bids and contractors to get the final loan approval.

So what a pleasant surprise it was to have the appraisal come in $11,000 OVER the sales price with NO conditions.  It even passed the bank’s review committee!  I guess we must have negotiated a great price on the purchase and, again, my client came out the winner.  These are the surprises you want.

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Appraisal Surprise

Unless you are paying cash for a home, you will undoubtedly have to deal with an appraisal.   I use the phrase ‘deal with’ somewhat gingerly; yes, the appraisal is an important part of determining the value of a property.  But, the REAL value–what I like to call the only market value–is the price agreed upon by a buyer and seller in a strictly ‘arms length’ transaction.

The appraisal is there primarily to protect the bank–and, to a degree, the buyer–from an inflated value for a high-value asset.  The bank will be loaning the money based on the value of a property and the appraiser is their on-site expert evaluating whether the price is justified for the existing market.  The appraisal fee (around $500 today)  is usually paid by the buyer who is not obligated to share the results with the seller.

Not long ago, the appraisal was a given, simply another step in the home-buying process.  You could just about predict that the appraised value would equal the purchase price of a home.  No more.   We all have stories of entire transactions needing to be re-structured or simply falling apart based on a low appraisal.

I had two appraisals this month with vastly different results and consequences.  In the first case, the bank required a second appraisal–not uncommon these days–due to some of their internal rules.   Where the first appraisal had come in right at the sales price, the second appraisal–just four weeks later–had the value at $15,000 below the amount!  Did the home really lose that much value in a month or was the difference simply a matter of ‘opinion’ between the two appraisers?  You could make a case for either scenario . . . though it really doesn’t matter.  Because the bank based their loan on the second (lower) appraisal.

Now we only had two choices: either the buyer had to bring more money to closing (money which they didn’t have) or the seller would need to reduce the price equaling the second appraisal.  In this situation, the seller was ready to sell so he dropped the price.  Ultimately my client–the buyer–came out the winner because he was able to buy the home for $15,000 less than the original offer price.

The second appraisal incident produced a different unexpected result . . . .and we are still waiting for the implications.  That story in a future update.

NOTE: If you are selling a home in Oregon, some new rules are going into effect April 1 relating to Carbon Monoxide monitors.  Check the State Fire Marshall’s information page on Carbon Monoxide and details regarding the new laws seller and landlords.

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The New Normal?

The new home sales numbers for Portland came out this week.  No major surprises and the storyline remains the same: home prices remain soft and sales are weak.  Or so you would think.

I attended a presentation by Ted Jones, an economist with Stewart Title, this week who actually thinks our prices now are back to ‘normal’.  In his opinion, the last ‘normal’ real estate market was in 2002 and, if we followed normal price gains, home prices would be about where they are today.  The graph looks pretty and the argument is convincing.  And I really hope he is right.

From a realtor perspective, it certainly does not yet feel ‘normal.’  It takes much more effort to put together an accepted offer and, even then, there is no real assurance of the sale actually closing.  This week’s  Oregonian  story on the new numbers quoted a broker feeling the pain of young realtors ‘working twice as hard for half as much money.’ 

There are so many hurdles to overcome before a home changes hands from one to another: agreement on price & terms, initial loan approval by bank, home inspections, appraisal, document reviews on multiple levels by banks, sometimes a second appraisal, more reviews, final loan documents and sellers willing to be flexible in extending closing.  Just today I extended the closing for one of my clients (buyers) due to bank beauracracy (or incompetence!).  If we close next week, it will be more than 30 days past our initial closing date.

So I don’t know whether this is now ‘normal’ but that’s the way it is.  What it does call for is patience, pro-activity and perseverance.  I continue to believe that it’s a great time to buy during these days of historically low interest rates.  The key is to act and take advantage.

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The Numbers on Radon

When I fill-in for the local hosts on OPB Radio’s ‘Morning Edition’, I often don’t have the time to closely listen to the stories. There is too much preparation between the breaks on a live news show to just focus and listen.

But last Friday a story caught my attention and I listened to it twice during the 4-hour broadcast. It had to do with the dangers of radon in the home in light of this being ‘National Radon Action Month.’

I am not an expert on radon but I do know that awareness is growing, especially as it relates to home sales. Until last year, I might have had one client per year request that a home be tested for radon prior to purchase. Now it is almost standard procedure in most home sales in the Portland area.

Radon is a natural, radioactive gas which can seep into your home through basements or foundations.   It is, of course, not healthy to breathe in a lot of radon which has been linked to lung cancer.  The fix is usually quite simple: draw the air from under the home and vent it up past the roofline.  The cost is generally less than $2,000.

Now here’s what caught my attention.  The EPA estimates that 21,000 people die each year from radon-caused lung cancer.   But, as the NPR story pointed out, less than 3,000 of those who died were non-smokers.  So it would appear that it’s not just radon which is the risk but radon combined with smoking.  This was new information for me.  It is helpful to look at numbers but it is wise to look at the same numbers in context.  As Mark Twain once said: “There are lies, damned lies . . . and then there are statistics.”!

Some parts of the country have much heavier concentrations of radon but even within a region the amounts can vary.  The fact that your neighbor’s home tested clean is no guarantee that there is no radon coming up through the basement on your home.  Evaluate the risk and your risk tolerance.  But always make sure you get all of the information before making your decision.

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