Daily Archives: April 19, 2011

Lake Oswego Council Okay’s Streetcar

LAKE OSWEGO, Ore. — The Lake Oswego City Council voted 4-3 Tuesday to endorse a streetcar extension from Portland to their city.

It was another heated meeting in the city council chambers. At one point, Mayor Jack Hoffman called for a break because people in the audience were booing the council.

Porltand’s streetcar has a line operating between Northwest 23rd Avenue and the South Waterfront District. The proposed extension would create a line from the South Waterfront to Lake Oswego, running alongside the Willamette River. The streetcar would dead end at what is now an Albertson’s parking lot off of South State Street.

With a price tag of $458 million, the biggest concern for those against the project is money.

Read the rest at KPTV 12

Did they listen to citizens? Is it wise to go ahead with a project there is no money for?

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More Dem Civility, Seniors Abused, Wrong Koch Brothers Receive Death Threats

The new ad targeting Paul Ryan’s district, H/T HotAir

Also, we read from the Des Moines Register;

“A case of mistaken identity has entangled a small family-owned Des Moines company in union protests and led to a death threat.”

“Angry callers are mistaking Koch Brothers, a Des Moines office supply firm, with the brothers who own Koch Industries, the global energy conglomerate…”

“Dutch Koch, president of the Des Moines company, wants everyone to know he’s not one of those Koch brothers, and he’s not politically active.”

“‘I initially thought it was humorous to be confused with a multibillionaire,’ he said, but then a death threat was left on his answering machine. Koch reported the call to the FBI, which he said traced it to a California man.”

After witnessing the racial epithets, vitriolic conduct and claims from Pioneer Square Friday, this is no shock.

Love the new civility and class displayed by the spoiled leftists of Moveon.commie.

Tell ’em where you saw it. Http://www.victoriataft.com

Lake Oswego Street Car Vote Tonight; Proponents Trot Out New Reason to Pass

They think we’re pretty dumb, apparently. Here’s what the Portland Tribune says about testimony at the recent town hall (here) about the street car being extended from South Waterfront to LO:



Red is for sale, purple is for rent

About 30 people testified in favor of the proposed line, arguing that it would decrease future commute times between the two cities and saying the Foothills area redevelopment would provide much-need new housing.[emph added]

 Sixty people testified their opposition to the plan, by the way. Let’s take a look at LO’s housing issues, shall we?
Corbett/Terwilliger/SoWa
I’ll grant you there’s not a lot of rental property out there in the old 97034. But look at the housing available.
Now if you’re looking for more affordable housing there’s another place you could look.  See that map over there? That’s around Corbett and Terwilliger and South Waterfront. 
“Condo King” Homer Williams Oregonian Photo

Hmmm… South Waterfront, South Waterfront… gee, that rings a bell. Oh yes, see those properties? Those are the condos built by Homer Williams for the planner class at South Waterfront that had to be sold/rented at fire sale prices because there is a glut of properties out there right now. 

In case someone forgot to tell the planners, we don’t have a dearth of housing right now; we’ve got a glut. Add to that a mortgage and foreclosure crisis and you’ve got a government made disaster in the making (or a business opportunity for Homer Williams here).
And now they’re inviting their old buddy back to build MORE in the waterfront foothills section of LO. What’s the definition of insanity again? Ronald Reagan put it best, 

“The more the plans fail, the more the planners plan.”

Tell ’em where you saw it. Http://www.victoriataft.com

Portland’s Housing Goes From Bad to Worse If PPS Bond/Levy Go Through. Pete the Banker & Joe the Small Business Owner Do the Math for You.

I asked Joe the Small Business Owner and Pete the Banker (who want to remain nameless due to what happens when businessmen speak out in the City of Portland here and here) to tell me the fall out of the Portland Public Schools’ bond and levy on the already dreadful local real estate biz (see here, here, here, here). 
First we go to Richard Leonetti who runs the dollars and sense (heh) at Oregon Catalyst (Here):

Portland Public Schools wants to raise your property taxes. On the May ballot they are asking for a half-billion dollar (that’s billion with a B) bond measure and a $57 million dollar increased operating levy. For those in the Portland school district, the bond will add $2.00 per $1,000 to their taxes and the operating levy will add $0.74 per $1,000.
This year’s taxes were $14.47 per $1,000, and so the bond and levy will result in a 19% increase in property taxes.

According to City-Data.com, the 2009 mean price for detached houses in Portland was $350,000. Without even adding in the allowed 3% annual increase, the owner of a $350,000 house will see their $5,065 tax bill increase by $960 ($80 per month) to a breathtaking new total of $6,025. Can you spell Chutzpah?

Now Joe the Small Business Owner tells you how your housing values go down with the bond/levy:

Here is the issue.  Stabilized Housing is key to an economic recovery.  Regardless of what any of the so called experts say, you will not have a strong sustained economic recovery until real estate values, and jobs, and building, stabilize.  In the old days real estate values were backed into by the rents and debt service.  For example if a property rents for 1000,  75% of that number equals 750.00 of net usable rent.  If you offset the payment principal interest taxes and insurance by the net economic rent you could back into a value of a property.  For example if principal and interest is 500.00 and taxes are 200 a month and insurance 50 you have a total monthly payment of 750.00 or equal to the rents.  This is assuming you want or use a 25% vacancy factor which is what is used on or in lending to for the most part.   If you use this Capitalization  method of 750.00 divided by 5% it tells you the house is worth 150,000.00  (Now in fairness on a single family home you use the gross rent multiplier method)  Now if you raise the taxes by 80.00 per month this same example now has a negative rent of 80.00 meaning rents meaning net rents are 670.00. 670 divided by 5 (5% cap rate) means the house is now worth 134,000.00 so there will be an effect on value unless you raise the rents.  So bottom line, this is an oversimplification of the appraisal process, but unless you can effectively raise the rents on a property to offset this increase of a monthly operating cost, in appraisal theory the home in this example just lost another 16,000.00 of valuation from a capitalization method of evluation.

I tried to be purely technical on this analysis, but here is the bottom line.  Ask anyone refinancing their home or selling their home in Oregon or SW Washington , do they want a further hit to value.  The appraisal process is difficult enough, many people are just making the payment, and increase of 80 on average per month is pretty severe.  In the purest form of analysis, from a capitalization method of valuation, there will be an effect on value based on one of the methods used in the evaluation of value on a home.  This is not a political answer, it is a numbers answer, and I say a very, very bad idea based on technical, not political, analysis….so the answer is, Absolutely NO

Then I asked Pete the Banker to weigh in. It’s not pretty, folks. 
Looking at the real estate market there are basically three types of sales right now.  They include all cash primarily investor deals, distressed sales (foreclosures, short sales) and purchases dependent on financing.  Each account for ~1/3rd of the overall sales volume, although in recent months distressed sales volume has been somewhat higher and purchases dependent on financing some what less.
In the case of each of these transaction types, a significant tax increase is likely to depress sales activity.  An investor acquiring property is looking for a return on his or her investment.  Generally, they will complete and analysis of the potential acquisition property by looking at the total revenue generated by the property, reduced by the property expenses to derive a net operating income.  This income figure is then divided by the expected rate of return (or capitalization rate) to establish a value which is the maximum amount the investor would be willing to pay.  Using Leonetti’s figure for tax increases on a median home of $960, and assuming no other changes in revenue, expense or expected rate of return (I’m using 8%), the increase in this expenditure would reduce price or value a potential investor would be willing to pay by ~$11,500 or 3.3%. 
 
In the second case of a distressed sale, it is hard to make a case that a tax increase would help an already delinquent or struggling borrower.  In essence it may become the final “straw on the camels” back so to speak.  And foreclosure or distressed sales are generally at prices well below existing market prices for comparable homes, further depressing the residential market price of other homes on the market.
 
In the final case of homes purchase contingent on financing, an increase in taxes of the magnitude suggested will adversely impact the ability of borrowers to qualify for the loan.  Generally, residential mortgage lenders consider the front end debt load ratio when qualifying a potential borrower meaning that the borrower’s potential housing expense including mortgage payment, taxes and insurance is compared to their income.  Recently, regulators are considering enacting a limit of 28% of these expenses to the borrower’s income for qualifying mortgages, although this hasn’t been finalized yet.  http://kcmblog.com/2011/04/04/qrm-is-the-pendulum-swinging-back-too-hard/.  Obviously, if taxes are to increase by $960 in order to qualify a potential borrower’s income must increase as well all other things staying the same to qualify.  This translates into $3,425 in extra annual income.
 
Assuming a purchase of $350,000 or a median home currently the potential borrowers seeking a 90% loan (currently regulators and Congress are debating an 80% loan to value maximum) then the following analysis would back into the necessary income to obtain a qualified residential mortgage through Fannie, Freddie or the FHA.  The loan applied for would be $315,000 at a currently offered interest rate of ~4.75% on a 30 yr term.  The Principal and Interest Payments would be $1643/mo or $19,716/yr.  Taxes based upon Leonetti’s analysis would be $5,065 per yr before the increase and $6,025 after.  I am assuming insurance would run approximately $900/yr.  So the total annual residential expenditures would be $25,681 and $26,641, respectively.  This would mean that the borrower would be required to have a gross income of $91,718 and $95,146, respectively, based on a front end debt ratio of 28%.  Notice that the income required jumps $3,428 or 3.7% because of increase in property tax.  This means that fewer potential buyer/borrowers will qualify and will either be unable to finalize the purchase or be required to put more money down.  Given that the median income in City-Data for median households with mortgages and apartment or rental households without mortgages is $74,824 and $44,788, respectively, then such a tax increase will shrink an already small pool of potential home buyers who must rely upon financing to qualify. 
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Lake Oswego Street Car Vote Tonight; Proponents Trot Out New Reason to Pass

They think we’re pretty dumb, apparently. Here’s what the Portland Tribune says about testimony at the recent town hall (here) about the street car being extended from South Waterfront to LO:



Red is for sale, purple is for rent

About 30 people testified in favor of the proposed line, arguing that it would decrease future commute times between the two cities and saying the Foothills area redevelopment would provide much-need new housing.[emph added]

 Sixty people testified their opposition to the plan, by the way. Let’s take a look at LO’s housing issues, shall we?
Corbett/Terwilliger/SoWa
I’ll grant you there’s not a lot of rental property out there in the old 97034. But look at the housing available.
Now if you’re looking for more affordable housing there’s another place you could look.  See that map over there? That’s around Corbett and Terwilliger and South Waterfront. 
“Condo King” Homer Williams Oregonian Photo

Hmmm… South Waterfront, South Waterfront… gee, that rings a bell. Oh yes, see those properties? Those are the condos built by Homer Williams for the planner class at South Waterfront that had to be sold/rented at fire sale prices because there is a glut of properties out there right now. 

In case someone forgot to tell the planners, we don’t have a dearth of housing right now; we’ve got a glut. Add to that a mortgage and foreclosure crisis and you’ve got a government made disaster in the making (or a business opportunity for Homer Williams here).
And now they’re inviting their old buddy back to build MORE in the waterfront foothills section of LO. What’s the definition of insanity again? Ronald Reagan put it best, 

“The more the plans fail, the more the planners plan.”

Tell ’em where you saw it. Http://www.victoriataft.com