Beach Blog

This is the third article in my series of Frequently Asked Questions which I answer repeatedly for buyers I am working with who are looking to buy beach property on the Oregon Coast.  

Do I need flood insurance?

If the house is in a FEMA Flood Zone and you are getting a mortgage, then you will need flood insurance.  It’s important to know that flood insurance rates can be in the thousands, so make sure to find out before making irreversible decisions in negotiating to buy. 

If it is in a flood zone, you will need a Flood Elevation Certificate in order to obtain insurance.  Ask if the owner has a current Flood Elevation Certificate.  If they do not already have the certificate, then be aware that it will cost hundreds of dollars to hire a surveyor to complete an FE so that your loan can be approved.  Also, because there is a scarcity of available surveyors, it could take some time to obtain that FE certificate. 

If the home you are buying is built at ground level on a concrete slab, or if it has a basement, then your flood insurance rates could go sky high.  It’s important to find out as early as possible in your negotiations to avoid unpleasant surprises after it is too late for a remedy.

Important:  if the house is in "Tsunami Hazard Zone" but not in a FEMA flood zone, then it is not likely your lender will require flood insurance.  Some people get flood insurance anyway, just in case.  I have been told by a FEMA rep that flood insurance would cover tsunami inundation.  

FEMA flood insurance caps out at $250,000 so if you are buying a house that will cost $500,000 to rebuild, the FEMA insurance may not be enough.  There are other privatized flood insurance options out there.  Ask your insurance agent what is best.

FEMA flood insurance rates are supposed to be the same regardless of which insurance agent writes the policy, however I often hear of clients who obtained quotes from more than one agent and the quotes differed.  So, it may be a good idea to ask more than one agent for a quote.  It's possible this is explained as human error.  Not sure.  But it won't hurt to ask around.

My last blog entry dealt with the first and most frequently asked question, in a series of FAQ which I encounter selling beach property in Tillamook County on the Oregon Coast.  Here is the second episode in that series.

Is this in tsunami zone?

The State of Oregon’s Dept of Geological and Mineral Industries (DOGAMI) publishes a tsunami hazard map.  So, it is very easy to determine whether a specific property lies within the tsunami hazard zone.  There are 2 levels of tsunami hazard:  Local and Distant.  The Local is the potential for inundation in the event of the “BigOne” (Cascadia Subduction Zone Earthquake) and the Distant zone is the potential for inundation in the event of a distant offshore earthquake (like in Japan or Alaska)   Some houses may have the line stop right at the doorstep, so does that mean when a tsunami comes, you can stand on your porch and watch the water come up to the edge?  Maybe not.  Keep in mind that this is all theory.  It may never come to pass… or it could occur an hour from now.  And, the end result could look entirely different than what is depicted on the DOGAMI maps.  One thing is clear:  apparently the lenders and the insurance companies are not terribly worried about it because being in tsunami zone does not by itself increase your insurance rate and it does not prevent you from getting a mortgage on the house.  Many properties may be in the tsunami hazard zone but are nowhere near the flood zone.  If the property is not in the FEMA Flood Zone, then flood insurance will normally not be required by the lender, even though it may be within the tsunami hazard zone.

This is the first article in my series of Frequently Asked Questions which I answer repeatedly for buyers I am working with who are looking to buy beach property on the Oregon Coast.  

Most asked question – Will I be able to do short term rental with this property?

Any given community may have special rules for short term rental.  If the property is located within a local jurisdiction, such as within an incorporated city, then the city will likely have its own ordinance pertaining to short term rental.  Some cities in Tillamook County do not allow short term rental at all.  Some “cities” in Tillamook County (like Pacific City) are not actually cities!  Pacific City, for example, is an unincorporated area of Tillamook County, so for Pacific City, and many other towns & villages in the county, the county’s ordinances will apply.  Tillamook County at this time allows short term rental, but licensing is required.  Many neighborhoods within the counties and cities have their own individual rules (CC&Rs or HOA bylaws) which restrict or limit short term rental.  The best bet for a prospective home buyer who wants to do short term rental is to be aligned with an experienced local real estate broker who knows the rules and knows the trends.  Nearly every community has had much recent discussion about the burgeoning numbers of short term rentals and many areas have proposed ordinances which may result in changes to the rental rules.  A local broker will be familiar with the current conversation and can be your best resource when deciding where to buy.  IMPORTANT:  be sure to also have a conversation with your loan officer because many people assume you can get a mortgage on your second home and then put it up as a short term rental.  That could result in a violation of the terms of your mortgage, so be sure you know before you buy what you can and cannot do.

What does 2021 and the next few years hold for our local real estate market?   Sure wish I knew.  I have been trying to glue my crystal ball back together after it shattered in 2007, but it's irreparably damaged. 

My best guess is that our new Democratic government will be so happy to be in control they will not want to burst anyone's bubble, so am guessing we will be back to Kennedy's attempt to recreate Camelot.  Saving our economy will be high on the list of priorities, so surely the American Dream of home ownership, which is the wheel that greases the economy, will be preserved and promoted during the next four years.

Because I live in an area where most of the home purchases are not by first time homebuyers, promoting the American Dream does not necessarily promise continued expansion for this specific market.  However, the reasons for the very active sales activity and depleted inventory here over the last year are likely to continue.  People do forget, but it takes time for those memories to fade.  The flight from the congested city life, and from the urban unrest of 2020 will surely continue for the next few years as city folk realize the value of having a rural respite where the ocean breeze cleans the air; and where they can sequester their families during times like those we have endured over the last year.  And, our work force has retooled in ways that will continue to allow people to spend more time working from home, so why not look out upon one of Tillamook County's many water bodies while you work?  Who needs a second home when you can make your beach house your primary residence now?  Surely we will see more and more people establishing primary residency along the Oregon Coast.

My broken crystal ball is trying to say our outlook is good.  Sure hope it's right!

2020... What a ride!  Coming into the year, the market on the Coast in Tillamook County was improving nicely, but certainly not dramatically.  Then when the reports of the pandemic hit, I was convinced our market would  come to a screeching halt.  So much for my crystal ball, which went cloudy back in 2006.  Anymore, when people ask what I forecast in the marketplace, my eyes just gloss over.  Nothing will surprise me anymore.  In the early 80's I never would have thought we would see home mortgage interest rates as high as 18%.  In the early 90's I never thought we would see interest rates jump again from 9% to 12% and certainly never thought that banks would refuse to honor interest rate locks...but it happened.  

Of course, I never thought I would experience a pandemic in my lifetime, and certainly never imagined it would serve to boost the local real estate market in favor of sellers.  Buyers have been flocking to the beach, mostly due to Covid and the hope of having a respite in this clean, rural, sparsely populated environment.  An escape from the city.

I have stories to tell of multiple offers with buyers doing crazy things to compete and prevail in their efforts to buy a beach house.  And now, even LOTS are selling again.  For so many years, lots were almost impossible to sell in this county, but now Buyers are finding this a way to get a foot in the door for their bug-out property away from the madness they are experiencing in the urban areas... not just Portland, but everywhere.  People want beauty, fresh air, peace and quiet.  And that is the perfect description of what Tillamook County has to give.  

Check out this beautiful home located in the foothills of the Coast Range, just an hour's drive to Intel in Hillsboro... or if you have your own plane, you can fly from Hillsboro airport to the Tillamook airport near this spacious home on 2 acres:

When I ask a prospective Buyer if they are concerned about buying in the "Tsunami Hazard Zone" they sometimes ask me, "Should I be concerned?"  How do you answer a question like that?  Here was my most recent attempt:

Regarding the tsunami hazard zone, I really can’t tell you whether it is something you should be concerned about or not.   I personally am not concerned because I have a philosophy that you have to die sometime anyway, so I would rather die from a tsunami than from cancer.  I wish I knew the actuarial odds, but I have a feeling the odds of dying from cancer are far higher than the odds of dying from tsunami.  I doubt that helps you, but if you want advice on whether you should be concerned, you really should get it from your insurance agent or from your own research on the internet.   According to the “experts” if we have a worst case scenario subduction zone earthquake in the realm of 9 on the scale, then most homes which are in the “hazard zone” will be at risk of inundation.  That said, no one knows when or if the earthquake will happen, and the damage will vary depending on where the earthquake is and how big it ends up being.  You can get insurance to cover the potential damage, but that won’t help you if you’re caught in it.  I am told that FEMA Flood Insurance will cover damage from tsunami, but only up to 250K.  Again, best to call your insurance agent for advice.

Just when I was getting ready to run an ad in Southern California to attract people who are tired of the frequent fires down there, Oregon burst into flames.  The last few days the air has been clean again, but before that we had an eerie week of smokey/smoggy air and warnings to stay indoors.  That just does not compute for this area.  It was a blessing to feel the fresh rain return and the gentle breeze from the ocean cleaning the air again yesterday and today.  Now I better understand why every year during the California wildfires, we get a rash of fire weary families wanting to move here.  A taste of their world makes me deeply appreciate mine!  I can't wait for midnight 12/31/2021.  2020... it's time for you to become a distant memory. Let's have a BORING year for a change. 

Looking back at my last post I find it hard to believe the last post was in 2012.  Wow.  A lot has happened since then. 

Instead of trying to catch up, I'd rather pretend I am just starting this, with the intent of posting more frequently.  We'll see how that goes!

To summarize the last 5 years for the local real estate market:  We finally came into a balanced market.  We really didn't start coming out of the great recession until 3 or 4 years ago.  And now we have Covid to deal with. 

It's a frightening world we are living in, but frankly I am fascinated that the pandemic did not bring the local real estate activity to its knees.  In fact, it has been extremely busy here.  Granted, every thing I do takes 3 times longer than normal because it takes planning, explaining, and preparing for safe practices.  But that's okay.  I am happy to invest the time and effort to keep myself, my family, my clients, and the community, as safe as possible. 

Since the "Ides of March" I have had a few new listings which had multiple offers competing within the first week, and I have made a few sales "sight unseen."  Surprisingly, only two buyers have wanted to try "lowball" offers, assuming Sellers must be desperate due to the pandemic.  However in both instances, Sellers held their ground.  People do not seem to be panicking about the economy, here, though I know there are tragic stories all over the area due to business closures and unemployment.  At this time, thankfully, it has not seriously hurt the real estate market in this area.   Maybe people all over are realizing more than ever the value of having a home at the beach to get away to when things like this happen. 

Knocking on wood as I write this, but it's a blessing to look out on our beautiful, fresh air environment knowing that in this entire county only 6 people were diagnosed with Covid since the inception.  Living in Rural America has huge benefits... today I am counting my blessings.

Are we there yet?  No question in my mind that we are there...at the bottom of the price slide.  Unless something drastic happens in the world or national economy, we surely are seeing a turnaround.  There is a lot of interest in buying beach property and there are many multiple offer situations these days.  When a foreclosure comes on the market it seems to sell right away.  Developers are buying up land. Yet, 90% of the buyers who contact me are still looking for a fire sale price.  We seem to be stuck with that for a while.  However, there are unfortunately many fire sale priced properties out there, though the pickings are getting slimmer by the day.  Once we work our way through that, there is nowhere to go but up.  Hold that thought.

The market has picked up, there is no question.  No price increases yet in this neighborhood, but at least there is more buyer activity. 

I own a house in Portland which I refinanced recently.  It appraised 3 years ago and then again in December for this refinance.  The new appraisal was 10% higher than the 3 year old appraisal.  That was a refreshing indicator.  Since 80% of my buyers for this area of the coast tend to come from the Portland Metro Area, then the first step is seeing Portland Metro values stabilize.

Not surprisingly here, buyers are still primarily interested in buying houses which are being sold at fire sale prices.  And, since that's what everyone is looking for, the result is that we have frequent multiple offer situations (aka bidding wars) which do tend to push prices higher.  So that will actually help the overall pricing trend.  Unfortunately, homes for sale by owners who are not willing to accept a fire sale price still languish on the market.  Once in a while a buyer falls in love with a particular house and agrees to be reasonable on the price, so little by little that should help the recovery.

Lot sales are still the worst of the worst.  You can understand why.  As long as there are distress sale houses coming on the market, buyers will be swayed toward the immediate gratification of a house they can start using right away, especially when it costs less to buy than it would to build one.

 

Here's what's happening in this area.  An investor has purchased all the unbuilt lots at Ocean Highlands (the development of new homes just as you are coming into Netarts which was started by Centex, then came to a halt when the market dropped).  He has been selling them, mostly to adjacent homeowners in that development, for between 19,000 and 69,000.  Actually, only one sold for 69,000 and it was a prime lot with a fabulous view.  Most of the other sales have been <39,000. 

 

Here is a list of all the land pending and sold during the last 12 months in Netarts and Oceanside, and most of this activity has been in the last 60 days:

(CLICK HERE)

This link is valid until 5/8/2012.

 

Don't get too excited about the $1.5M pending sale (the 3 lots at the top of Maxwell Mountain in Oceanside where the hang gliders jump off).  It is my sale, woohooo!   However, this property is not typical of the lots for sale on the coast.  These 3 lots are what I call "trophy properties" because they have the rarest of views from high on a bluff, and the building pad is actually flat on two of the lots and the third lot is an oceanfront acreage. 

Anyway, even though these 3 lots are not the norm, and neither are the bargain basement sales, all this activity is a giant step in the right direction. 

 

I remember a couple of years ago attending a seminar by someone who used to head up the foreclosures department for IndyMac.  His outlook/forecast suggested that the way we will know when we are coming out of the slump is when investors swoop in and start to buy up cheap lots/land.  Well, that's exactly what is happening.  So, that alone makes me feel very very optimistic about where we are headed: Not toward stellar price increases, yet, but at least that we are making our way out of the abyss!

Have a blessed day on this beautiful and incredible and hopeful Easter Sunday.

Pam Zielinski