Bloomberg – Sep 1, 2010 10:15 AM ET
 
 U.S. commercial real estate yields are near the highest level relative to
 Treasury bonds on record, a signal to some investors it’s time to buy property.
 
 Capitalization rates, a measure of real estate yields, averaged 7.22 percent in
 the second quarter, based on an index calculated by the National Council of Real
 Estate Investment Fiduciaries. That was 429 basis points, or 4.29 percentage
 points, higher than the yield on 10-year government bonds as of June 30,
 according to data compiled by Bloomberg. It’s about 475 basis points higher than
 Treasury yields as of yesterday.
 
 That spread is near the record 539 basis points in the first quarter of 2009,
 when the U.S. was mired in the worst of the financial crisis and property prices
 sank. Risk-averse investors are seeking the highest-quality office towers,
 hotels and apartments as the gap widens, according to Nori Gerardo Lietz,
 partner and chief strategist for private real estate at Partners Group AG in San
 Francisco.
 
 “The data indicate that real estate is poised for a rebound,” said Gerardo
 Lietz, who advises pension funds on property investments.
 
 Some buyers already are acquiring buildings at lower cap rates, which move
 inversely to price. In June, a group of South Korean pension fund investors
 bought the 33-story Wells Fargo Building in San Francisco for $333 million from
 Principal Financial Group Inc. in one of the largest transactions in the second
 quarter, according to Real Capital Analytics Inc., a property research firm. The
 office tower sold at a cap rate of about 7 percent, said Goodwin Gaw, the
 developer who helped broker on the deal.
 
 New York Rates
 
 In Manhattan, RXR Realty LLC bought a stake in 340 Madison Ave., a 22-story
 office building, at a cap rate of 6 percent, according to New York-based Real
 Capital. Cap rates are calculated by dividing net operating income by purchase
 price, so the lower the rate, the higher the value of the property, and vice
 versa.
 
 The NCREIF index measures 6,066 U.S. properties with a market value of $234.5
 billion. The spread over Treasury yields was calculated using transaction cap
 rates, which are based on actual sales — 48 in the second quarter — and are
 usually more reliable than appraised values, according to Chicago-based NCREIF.
 The organization’s measure, which it began publishing in 1982, represents
 current yield before any price appreciation.
 
 Comparing Yields
 
 Investors compare property yields with Treasuries to determine how much
 potential profit real estate offers relative to an investment that’s considered
 low-risk. The spread shrank to less than 80 basis points, the narrowest in 16
 years, when commercial real estate prices peaked in 2007. Property values have
 dropped more than 40 percent since the October 2007 top of the market, according
 to Moody’s Investors Service.
 
 The gap’s widening follows a plunge in bond yields after the global financial
 crisis spurred a flight to safety and the Federal Reserve slashed interest rates
 to a record low. Treasury bonds yesterday completed the biggest monthly rally
 since the end of 2008 amid signs economic growth is faltering, with the
 benchmark 10-year note yielding 2.47 percent.
 
 “Property is attractively priced versus the fixed-income market,” said Ritson
 Ferguson, chief investment officer of ING Clarion Real Estate Securities in
 Radnor, Pennsylvania, which manages about $12 billion.
 
 The wide spread carries a warning signal to some investors because the economy
 remains weak, hurting commercial rents and occupancy.
 
 Being ‘Picky’
 
 “It’s questionable how much growth you’re going to get,” said James S. Corl,
 managing director for distressed real estate investments at Siguler Guff & Co.,
 a New York-based private- equity firm. “Yes, there is value in real estate but
 you’ve got to be very picky. If you pay up for existing leases, it’s very hard
 to manage your way out of that situation.”
 
 For much of the past two decades, institutional real estate was valued at about
 a 9 percent cap rate, according to Jeffrey D. Fisher, a consultant to NCREIF and
 a real estate professor at Indiana University in Bloomington, Indiana. Cap rates
 on some commercial deals fell to less than 4 percent during the peak.
 
 The rate declined in the second quarter as transactions began to increase, he
 said.
 
 “What I’m seeing is a two-tiered market right now,” Fisher said. “For properties
 that have high occupancy, that’s where you really have seen the price
 appreciation and cap rates falling.” For buildings with low occupancy rates,
 “there is very little interest,” he said.
 
 Sales Rebound
 
 U.S. sales of office, retail, industrial, apartment and hotel properties totaled
 $20.7 billion in the second quarter, according to Real Capital. That was up 86
 percent from $11.1 billion a year earlier.
 
 The deals were still 85 percent below the peak of $135.7 billion in the second
 quarter of 2007, Real Capital data show.
 
 Corporate bond yields are a better comparison than Treasuries and also indicate
 that properties are undervalued, said Michael Knott, managing director at Green
 Street Advisors Inc., a Newport Beach, California-based company that specializes
 in analyzing real estate investment trusts. Bonds rated Baa by Moody’s are
 perceived as investments with moderate risk, similar to commercial real estate,
 said Knott.
 
 The spread between NCREIF real estate cap rates and Baa- rated corporate bonds
 is more than 200 basis points, Knott said. The average during the past 25 years
 is about 140 basis points.
 
 “Underlying real estate looks cheap to us relative to where moderate-risk
 corporate bond yields are priced,” Knott said in a telephone interview. The
 exception is publicly traded REITs, which trade at a premium to asset values, he
 said.
 
 “Smart managers today are being very selective because they realize a lot more
 property has to clear the market,” said Corl of Siguler Guff. “The volume of
 deals is definitely going to go up.”

The new Market Action report from RMLS with stats for July is, frankly, dismal.  But around the Lee Davies Real Estate office, brokers have been rushing around with a spring in their step and our moving truck has had little down time so we decided to crunch some numbers to see how we compare to the industry overall.
 
If you look at the RMLS report below, you’ll see that July 2010 pending sales were down 24.9% over 2009 but LDRE enjoyed a 33% increase.  That’s a 58% spread!  Portland Metro’s closed sales for July compared to last year declined 29% while LDRE closings were down 11% – that’s 18% above the average.  Average sales prices across Portland Metro were up 2.9% but up a impressive 21.6% from $395,883 to $481,436 at the LDRE closing desk.
 
Comparing year-to-date figures which give you a much broader look at the picture, you’ll see the numbers are a little rosier for our market overall.  Here is the breakdown of January to July ’10 compared to ‘09:
 
                RMLS Closed Sales          +22.5%
                LDRE Closed Sales           +85.4%
 
                RMLS New Listings          +09.1%
                LDRE New Listings           +30.5%
 
Of course, our company growth has played a role in these increases.  Our team of brokers has increased 33% during the same time frame.
 
Many conclusions can be made when crunching the numbers but we like to think that our professional, consistent team approach has played a major role in, not just surviving the recent market conditions, but thriving in spite of them.
 
The statistic of glaring concern to us, as revealed in this report, is the 10.8 month current inventory compared to 7.3 for 2009.  This is the first time since March that this number hasn’t improved over the prior year and it took a big jump.  We are feeling the reverberation of the end of the tax credit which may have prompted summer buyers to buy early and has had a domino effect on the market.  An inventory number this high will likely have a negative effect on home prices, however it is a situation an educated and realistic seller can overcome.  For buyers, on the other hand,  it’s a dream come true…an abundance of inventory and interest rates the lowest they’ve been since Freddie Mac began tracking rates 1971.
 
If you are ready to crunch some numbers of your own and consider taking advantage of this unique window of opportunity, please contact one of our professional brokers today!

 “Not in my back yard”
The Portland Tribune 
In the pursuit of a long-term transportation plan that includes the installation of a new “livable neighborhood” in North Bethany, Washington County is expanding Bethany Boulevard, a project that will cut into the yards of some Oak Hills neighbors.  Click here to see the article in its entirety. 

Link to 3not5 blog created by Bethany neighbors.

“We need a bigger back yard.”  “Wouldn’t a cul-de-sac be perfect?”  “Now that the kids are gone, we really don’t need this big house!”  The main reasons we decide to make a move are often child related.  If you’d like to research neighborhoods with the best public schools to fit your family’s needs, here’s the resource you’re looking for:  School Report Cards
Remember too that schools can affect your home’s resale value!

Click on the image below to see the full RMLS report in PDF format:

Market Action Report

from Northwest Mortgage Group 

As of August 18, 2010 (1% loan fee applies)

Rates shown above are based on transactions with a 20% down payment, 1% loan origination fee, 740 credit scores, impounds for property taxes and insurance and 30-day rate lock.  Contact Jeanine Roe or Brian Page of NW Mortgage Group for more information at 503.439.9191.

1.  Hiring a friend over an expert.  Having an experienced broker is now more critical than ever.  Although your emotions may be pulling you toward a friend or relative who needs some business, your business sense should cause you to stop and think first.  Selling your home is likely one of the most significant transactions you will make in your lifetime.  Hiring an agent or team, such as Lee Davies Real Estate, with experience under their belt in up and down markets as well as a proven aggressive home selling plan, will save you headaches and successfully guide you to getting your home sold.

2.  Overpricing.  Although you may hope and want for more, overpricing your home just won’t bring in a higher selling price.  It will, however, create a frustrating situation when you haven’t sold your home after several months of cleaning your way out the door every morning.  A comprehensive appraisal-style pricing strategy will help sell your home more quickly and ultimately for the best price possible.

3.  Skipping Home Prep Step.  With so many listings on the market, having your home “show ready” is more important than it has ever been.  A well maintained home that shows like a model will have a leg up on the competition.  As savvy as many buyers believe they are today, many just can’t see past scratched walls, unattended flower beds and cluttery knick-knacks.  Buyers who can imagine themselves comfortably living in a home, without imagining needed repairs, may also be able to imagine writing up that offer.

Need to get rid of an old refrigerator?  The Energy Trust of Oregon will pick it up and you’ll get $30 for participating between now and December 31, 2010.  What a deal!  Refrigerator Recycling details

Beginning August 1, 2010, if you are selling a home with an uncertified woodstove, you will be required to remove this device from the home.  DEQ details

The sun is finally out and we are proud to announce the return our car wash sponsorship program for local schools and charities.  Lee Davies Real Estate offers the use of our parking lot and supplies for groups interested in a car wash fundraiser.  Please contact Julie Williams if your group is interested in taking advantage of this opportunity.