“Signs Of The Adjustment Are Everywhere” In Oregon
The Mail Tribune reports from Oregon. “Even though sellers have been reluctant to lower prices, it appears that has been one way of attracting buyers during the calmer market. Jim Torrey, who bought a house in Medford last month, said he noticed a trend of price reductions when walking through the Roosevelt Elementary School neighborhood.”
“‘We looked about 45 days,’ Torrey said. ‘It seemed on a weekly basis in the east-side hills that we saw at least a couple of reduction signs.’”
“He discovered sellers were more willing to negotiate than in previous purchases and more willing to accommodate certain requests.”
“Sorting through the sheer number of properties available was a task in itself, he said. ‘It was almost overwhelming, every time we put our preferences in the computer it would come back with 35 or 40 properties.’”
“Some of the county’s markets saw higher median prices, some lower. Eagle Point’s median tumbled 14 percent to $239,000.”
The Register Guard. “Building permits for home construction dropped sharply statewide, down 14 percent from August and down 30 percent compared with a year ago. ‘Oregon continues to feel the impact of the national housing slowdown,’ economist Tim Duy said. ‘The depth and speed of the housing slowdown has prompted some commentators to issue recession warnings.’”
“There is a risk, he said, that consumer spending will slow sharply if falling home prices curb people’s ability to tap into their home equity.”
The Oregonian. “For a variety of reasons, much has changed in the past few months, both in the southwest suburbs and across the country. Compared with some cities where markets collapsed almost overnight, however, it’s becoming clear that the slowdown creeping through the southwest suburbs portends, at worst, a return to more sane and sustainable market conditions.”
“In recent weeks, the air has been hissing out of the balloon. Housing inventories grew to 4.5 percent in September, and signs of the slowing, or, as some agents prefer to call it, the ‘adjustment’ — are showing up everywhere.”
“Some large residential builders, for instance, are offering incentive programs to coax hesitant prospective buyers off the fence. In the existing-homes market, many buyers are reducing their asking prices, often dramatically.”
“Larry Hilton, a broker and residential land specialist in Tigard, recently saw firsthand an example of the new sluggishness: While preparing a market analysis for a house in northern Marion County, he had trouble finding comparable examples needed to set a price.”
“The reason? ‘Because there are no recent sales in that area,’ Hilton said. ‘None. We’re seeing more and more of these things across the board these days.’”
“The housing market in Clark County has slowed considerably in recent months, Sebastian said, as has Portland’s east side, where a glut of houses remains.”
“‘Right now, it’s all a matter of having quality product in the right spot and building the right thing,’ said Drew Prell, who recently completed a retail and commercial project near downtown Lake Oswego. ‘But if I’m glad I’m not out in Hillsboro trying to sell houses, I’m certainly glad I’m not in Las Vegas, New York and Southern California.’”
“Analysts widely agree that real estate ‘bubbles’ in all three of those locations, as well as once-incandescent pockets elsewhere, have burst in recent months. But those same analysts also agree that no such bubble formed in Portland, which should help soften the effect of slowing sales and increasing housing inventories.”
“‘Everyone in the residential food chain, from contractors to mortgage originators to materials suppliers, is going to feel the slowdown,’ economist Bill Conerly said. ‘And it may take two to three years to work off the excess of housing we now have in the works.’”
“People who bought their houses as prices peaked may sustain the most economic damage, particularly if they financed the purchase with adjustable-rate mortgages, said Sandra Carlton, owner of Arrowhead Mortgage in Lake Oswego.”
“‘What all of that means is that foreclosure rates are going to be high next year and for a few years into the future,’ Carlton said. ‘At the very least, 2007 will be an interesting year.’”
“She predicted that a cooling real estate market will result in a significant thinning of her colleagues, particularly newcomers. ‘If you are chasing re-fis, your days are numbered,’ she said.”
“Analysts widely agree that real estate ‘bubbles’ in all three of those locations, as well as once-incandescent pockets elsewhere, have burst in recent months.”
Shouldn’t these boomlets be properly referred to as “local froth,” as all real estate markets are local?
Gotta love that froth……..rotfl
“Sorting through the sheer number of properties available was a task in itself, he said. ‘It was almost overwhelming, every time we put our preferences in the computer it would come back with 35 or 40 properties.’”
I would consider that to be prima facie evidence of a buyer shortage.
And that should have been his clue that now was not the time to buy.
Meet Jim Torrey, Greater Fool. Sees a flood of reduced signs and thinks he’s found a bargain.
Bargain bin mentality, I usually get the urge to buy something when it is cheaper than it was the last time I looked at it. Appears to be a savings, hopefully prices will shoot back up and Jim will be a happy bargoon finder!
Right…. Bad things like price reductions only happen to the “other” guys…
Actually, when I see the first price reduced signs at Barnes & Noble or Target (they only stores I visist that reduce prices regularly and sequentially). I first take an inventory check — if the book/item is reduced significantly and there aren’t many copies I might buy it. When I see it is just reduce 10%-15% and there is a HUGE inventory, I will wait. Doesn’t always work, I do miss out on some items that clear out even with the large inventory and minor reduction.
My favorites are the books on amazon for 1 penny. Many PB classics. Eat the shipping since that’s where the seller makes a buck, but still amusing. No sales tax though.
The Mail Tribune article also headlines the fact that inventory is “declining”, but gives no specifics and no comparison to last year. It’s much higher, I know. I read this and wondered if it was meant as a scare tactic to buyers - inventory is going down, prices are holding firm, no real reason to wait.
I don’t recall ever seeing actual numbers from Oregon. We get stuff like this:
‘In June 2005, for instance, the Portland area’s housing inventory dipped to a record low of 1.5 months. The same figure in January 2004, by contrast, stood at a relatively fat 6.1 percent.’
I’ve never been able to find accurate inventories statistics before I started tracking it last January. I remember that inventory in January on the rmls.com site for the Portland area hovered around 7100 units for a long time. In April it started really shooting up until it hit 15,929 on October 23rd. Now it has gone down a little so it is about 15,716 currently for SFH and Condos. But it is a good doubling of inventory in the last 6 months. Can’t wait to see where inventory goes once it picks up again next spring.
I’m watching Portland like a hawk having moved up here from San Diego for lifestyle reasons - I like the mountains and I hate the beach.
I’m renting currently but see a sizeable correction here in the works - it’s just going to be 6-12 months behind San Diego.
Once the papers are full of blood on the streets of So Cal and the numbers here go -ve year over year - people are going to watch and wait and the ARM’s are going to start to blow up in people’s faces.
huh? Looks like Greenspam double speak to me.
It is all spin. I know that, in certain areas, inventory is down a little as people have pulled their properties off the market hoping for a spring rebound. I have noticed more and more land coming on the market in Oregon and Washington and the listing prices are a little less than even a few months ago. Some builders still snatching it up, but they are probably overly optimistic regarding the situation. It seems land owners are realizing that they have to try and sell now to hope for anything near the peak. I look for a lot more land to become available. Even in the form of improved lots. Areas around Medford, Grants Pass, etc. are really going to take a hit. The economies cannot support the prices. I think in a years time, Oregon and Washington will be reeling.
“‘Right now, it’s all a matter of having quality product in the right spot and building the right thing,’ said Drew Prell, who recently completed a retail and commercial project near downtown Lake Oswego. ‘But if I’m glad I’m not out in Hillsboro trying to sell houses, I’m certainly glad I’m not in Las Vegas, New York and Southern California.’”
“Analysts widely agree that real estate ‘bubbles’ in all three of those locations, as well as once-incandescent pockets elsewhere, have burst in recent months. But those same analysts also agree that no such bubble formed in Portland, which should help soften the effect of slowing sales and increasing housing inventories.”
I don’t know about Hillsboro (Silicon Forest, remember that idea?) but the Pearl District in downtown Portland is in for one hell of a correction to its “no such” Bubble.
Looking forward to picking a couple of those loft condos up @ 9-10 cap in a couple of years when the bloodletting drains into the Willamette.
Focus first on the return OF your investment vs. ON same.
I’m gonna guess a 30% haircut for Pearl District, worse in the more questionable areas, like that Riverscape development WAY north of Pearl district. 30% would put you in a penthouse for about $350-400K, which would bring PITI close to rent levels.
Hillsboro has a huge glut of homes for sale, and they are still building hundreds more here. For 4-5 months I have seen dozens of homes for sale, plus six new neighborhoods under construction, along my commute from western edge of Beaverton to Orenco Station. *Very few* of those signs have gone away over these months.
Every single road leading off into residential neighborhoods along Baseline has multiple For Sale signs. In the neighborhood where I rent (1 min walk from a local MAX train stop), only 2 houses out of the ~20 FS have sold over the last four months. And every other week another house seems to go up for sale. I wonder what it’s like in Arbor Roses - I should go take some pictures in that Queen Creek of Hillsboro.
This area is going to get VERY ugly in a year.
PDXrenter
New idea-
Perhaps its time to create a “Reverse MLS”. Prospective home buyer can place an ad describing how much they are willing to pay for a home in a certain area. Ad would include desired amentities. Sellers can then invite borrowers to come review the property to see if it meets buyers requirements. Much like an mls listing created a market of buyers fighting over each other, a reverse mls would turn the tables. You could even advertise your financial stablity to help show that they are working with a well qualifed borrower.
What do you think?
Problem with this idea –appealing though it may be to us bubble sitters– is, neither sellers nor lenders care about “qualified borrowers” or “financial stablity” anymore. Which is why things are they way they are right now. They only care about two things:
1. getting the highest price (and commission/fees) possible, and
2. closing the deal
As long as the FB signs the papers and the money changes hands, they don’t care how F’d the FB really is. All the risk has been sold downstream to MBS/CMO bag-holders (and the taxpayers that will eventually bail out the GSE bag-holders).
Nice idea though…
Yup. Not just houses. My father-in-law wanted to pay cash for a car. Had to drive out of town to get the car he wanted. The local dealer could care less.
And I could care less when DBs like that dealer fold and the local community whines about it. Same thing with the DBs that overbid work and then come back later telling you they need the work. Too f* late.
So true. The real estate crowd these days is like the crowd of corrupt losers that have been running our congress. A buck in my pocket today and be damned. Yes I will cut my own taxes (but not spending) and let your children try to pay it back to the Chinese with interest. I am hopeful that this RE orgy gone bad will bring back some honest and sensible business types that have been few and far between over the last five years.
Everything except being invited over to view the property. I would like a full prospectus of the property presented to me, showing it’s maintenance history (much like a car) photographs documenting the history of work completed, neighborhood and community amenities, information on neighbors, etc. It would be best for them to begin a portfolio now if they haven’t already …..
And finally, I would like each seller to write an emotionally stimulating 500 word essay, explaining to Mrs. L and I why we should pick their home to purchase.
I am in a situation where I have to buy . My parents are moving to town and there are no rentals (small farming community.)
this is what we are doing:
picked out five homes of about same price range, similar amenities.
send letter to all five listing all five properties, listing agent, etc.
“we are buyers. we have preapproval. we will buy in one month. submit your offers to us.”
we expect to get responses from at least three of them.
Mina
“She predicted that a cooling real estate market will result in a significant thinning of her colleagues, particularly newcomers. ‘If you are chasing re-fis, your days are numbered,’ she said.”
This is probably incorrect. I believe that to try and save the world the Fed will encourage a Refi Boom to help soften the landing. I believe most folks will not be able to take advantage of it as the value of their home decreases.
The probable future refi boom for those who took on unconventional loans will probably NOT decrease their mortgage payment. The question is how much more these people will have to pay, how much money they have to bring to the table to be able to refi, and can they afford their new payment.
“Larry Hilton, a broker and residential land specialist in Tigard, recently saw firsthand an example of the new sluggishness: While preparing a market analysis for a house in northern Marion County, he had trouble finding comparable examples needed to set a price.”
“The reason? ‘Because there are no recent sales in that area,’ Hilton said. ‘None. We’re seeing more and more of these things across the board these days.’”
This phenomenon should add a new wrinkle, and make it interesting for appraisers.
Reverse MLS… I had that same thought. Eliminate the middleman and cut to the chase.
The credit reporting agencies and other Big Brother companies already have reverse-MLS’s on all of us. They already sell the information, unfortunately they don’t care about good credit and cash.
“Oregon, and especially Portland, will have a milder cycle than the rest of the nation, said Bill Conerly, a regional economist whose business, Conerly Consulting, is based in Lake Oswego. The key factors driving that are the continued strong migration to the state and the fact that Portland, largely because of its growth-limiting urban growth boundary, did not overbuild.”
Yes, it is all based on strong migration of Californians coming to the state with their equity. As long as they keep coming we will be fine. After all, homes were undervalued here for so long, that it is time that we took our rightful place as a big shot west coast city with home prices equivalant to CA’s just a few, short years ago. It is past time Portland is recognized for how desirable it really is!
Does anyone have insights on urban growth boundaries? And if it really does prevent overbuilding? Will we be able to avoid price declines simply because we have a ugb?
With respect to bubbles, I think the main effect of the Urban Growth Boundary is to slow down the growth process. It makes it more difficult for developers to oversupply the market within a short period of time. Because supply is built more slowly, it becomes more likely that the bubble will pop before the market is completely oversaturated. I think there will still be bubbles, but they will probably be milder than in areas that do not restrict growth.
I think there are also some secondary effects. I think the UGB forces developers to be a little more thoughtful about their projects, and this probably causes their developments to have better fundamental values (such as being close to amenties, preserving some public spaces and green spaces that are desired by potential residents, not just speculators). The better fundamental values may also help mitigate price declines.
I think enough migrating Californians could turn anywhere into another must-live-in-citee. However, those selling to them must thank their lucky stars someone has bought. Is it a cargo cult mentality? Does the whole economy shows signs of this exuberance at its peak?
It’s fascinating how all these articles from places not as far along the real estate cycle all claim “just a slowdown, no bubble here”. We heard exactly the same thing last year from places that clearly are now in a significant downturn.
I’ve been thinking the same thing as the news on Oregon and Washington has rolled in lately.
I think the delay in OR and WA might have to do with a collapsing market in the lower levels and a continued stream of incoming CA equity locust propping up the median. I can assure you prices are falling in Ashland in the lower ranges, but the properties are still not selling. And they should, they are still far out or reach of most locals.
Mr. Fester:
I was in Ashland last month, and there were for sale signs galore. I howled when I saw Billings Ranch, a development of MacMansions for the CA equity crowd; it’s a ghost town! I watch the MLS for under $425K, and yes, there are lots of price reductions and very little selling.
I hope to buy a little cottage there in 2007 or 2008.
We have lots of those in Ashland, and there should be plenty in your range once prices normalize. Most historic homes in town are quite small, but it just forces one out into the garden.
So when will we stop hearing “California has a bubble, but not X”? Maybe only in 2008.
I like how California and Arizona are acting as the leading edges. Those of us in flyover country can now refute those same arguments CA and AZ heard last year by pointing to their current (crashing) state.
So what defines a “bubble”? I would assume unusual appreciation in the local housing market. But what is unusual? Is a 3-5% appreciation per year usual? I would say so, anything beyond that kind of return on a multi-year trend would seem to be a bubble in my mind.
That begs the question: Has Oregon seen unusual housing appreciation numbers?
Ok, I’ll bite that on that one.
Appreciation numbers from some cities in Oregon as of June 2005, not as current as I would like, but it takes us close to the top of the bubble.
OREGON HOME-PRICE APPRECIATION
2004 5-year
Medford/Ashland 19.57% 69.49%
Eugene 12.26% 30.70%
Portland Metro 10.15% 32.70%
Bend 9.66% 47.40%
Corvallis 7.68% 24.77%
Salem 6.34% 24.22%
As you can see, appreciation ranges from ~ 5%/year in Salem to ~14% /year in Medford. I know Bend peaked in 2006, so it would be close to Medford. Ashland, I can assure you, is far worst of all (~15%-17%/year). It seems to show the California Equity Locust effect. Locust land seems to include Portland (city life), or sunnier locations like the Rogue Valley and Bend, and a few other areas not listed (Oregon Coast, Hood River area).
Locust seem to be the primary drivers of the bubble, places that never occur to someone sitting in their San Jose living room (e.g., Salem, LaGrande, and a few places I wont mention are much less bubbly).
Here is my working definition of a bubble:
In a “normal” market, as demand increases, prices increase. But as the price increases, demand begins to fall. This system is self-stabilizing and will remain near equilibrium most of the time (negative feedback loop).
In a bubble market, as demand increases, prices also increase. However, contrary to a normal market, as the price increases, demand grows even more because people intend to profit from the price increase. Contrary to a normal market, this system is self-destabilizing and will tend to experience large oscillations (bubbles) from equilibrium (positive feedback loop).
A bubble exists for any asset when the rate of return for that asset is less than for a risk-free asset (T-bonds). People are buying the asset for expected price gains, not yield.
In housing, that means when it’s cheaper to rent than to buy (all costs included).
Yogurt –
You would not be slyly insinuating that perhaps US stocks are overvalued? Because last time I checked, dividend yields were considerably lower than T-bond yields, even though stocks have basically returned 0% since 2000, except to those who had the luxury of being able to postdate their options (round trip down then back up…).
Jim Torrey, who bought a house in Medford last month, said he noticed a trend of price reductions when walking through the Roosevelt Elementary School neighborhood.”
Jim, If you watched this trend for 45 days, why in God’s name did
you buy a house?…Maybe you need to attend Roosevelt yourself!
Jim Torrey definitely has a box of stupid, I don’t know if he also had a bucket of money or just a bucket of debt.
Here is an example of Portland real estate.
http://www.zillow.com/HomeDetails.htm?city=Portland&o=North&state=OR&zprop=48626414
In summer 2003, we went to an empty open house for this very lovely home, in one of Portland’s desirable, westside neighborhoods. We thought the asking price of 350k was a little bit steep and that we had best get our financial “house in order” before we bite the bullet.
Fast forward to 2006. Zillow currently says that this home is valued at 499k. But the comparables are really not equivalents. I would say this house would realistically be priced closer to 600-650k right now from what I have seen in this neighborhood.
Here is the sales history:
09/26/2003: $316,000
05/28/1998: $257,850
It has easily doubled in 3 short years. In hindsight, I wish we had done an 80/10/10 loan or something, but we were too prudent for that. Now for 359k, we can barely get a bland 60s split level, much further out from this. Current median is $350k. Portland prices have an awfully long way to come down.
I just lust for some of those Pearl District places. They’re amazing. But the prices! Oy vey!
I have been lusting after the new Meriweather 1800sq ft loft my 25 yr old mortgage broker/flipper friends just bought in the 750k-1mil range. It is sweet and right down by the Williamette river. This weekend my kid’s 17 yr old babysitter, commented on how she remembers when all of that area flooded when she was a little girl. After this last weeks torrential rain and flooding, I am lusting no longer!
Meriwether? Nice design, gorgeous views, but I wouldn’t plunk down $750k to live in a neighborhood that has zero amenities right now. Except for living in a tower, SoWa is essentially a suburban neighborhood right now, although it is priced as if it were in a prime downtown location.
“The housing market in Clark County has slowed considerably in recent months, Sebastian said, as has Portland’s east side, where a glut of houses remains.”
Sebastian = Randy Sebastian = Renaissance Homes = Overpriced shitbox.
Renaissance prides itself in being a custom homebuilder, but if you want to do anything to the home other than pick the paint, flooring, fixtures and countertops from their preplanned list, they’ll tell you to piss off. No changing of their floorplan or pre-planned bath/kitchen and built-in layouts.
The Clark County luxury home market has been overbuilt and we are seeing the builders starting to pay the price of their over exuberance.
Sorry lefantome, your post wound up in the spam bucket. Here is what you posted:
‘Everything except being invited over to view the property. I would like a full prospectus of the property presented to me, showing it’s maintenance history (much like a car) photographs documenting the history of work completed, neighborhood and community amenities, information on neighbors, etc. It would be best for them to begin a portfolio now if they haven’t already …..’
‘And finally, I would like each seller to write an emotionally stimulating 500 word essay, explaining to Mrs. L and I why we should pick their home to purchase.
‘
A friend of mine who does Sheetrock work down here in FL told me how busy he was a year ago. He says things are so slow that is is lucky to get in 10 hours a week. He and his wife just got divorced and he had to move back in with his mom at 33. Talk about rough times. At least he isnt homeless…. yet..
Anyone remember that Realtor™ a few months back that said prices won’t fall because of the price of sheetrock? High-larious.
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From North Carolina. “If you head east you’ll see twice as many homes for sale this year than last in many areas. Coastal communities are seeing a huge slowdown. ‘Because prices are going to keep going up, I don’t know if you know what sheetrock is going for right now but it’s $4 a sheet more than it was last year,’ Realtor Linda Craft said. That’s why prices will likely continue to rise even as sales are expected to steadily slow down.”
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http://thehousingbubbleblog.com/?p=1455
I was shocked the other night coming home on election day. I rent ($1300) in a very desireable neighborhood next to the Pearl, with 500k condos to 1 mil + homes. Last year, you would rarely see a for sale sign as they would sell before they made it to market. On my way home, I saw 3 houses for sale on one side of one block. Just about every other house was for sale on that tiny block. That to me is an amazing sight for this neighborhood. And on a walk last week to the Pearl, I saw a nice brownstone with a price reduced sign! It has been sitting since summer. Small things, yet they are giving me much hope that we will soon be following in CA footsteps. Thankfully this blog has given me so much insight and help to hold on this year.
A cool quote I keep posted on my computer from Michelle Singletary of the Washington Post:
“The people who win big in the real estate game are the ones with the courage to sit out the manias as the markets reach their peaks and buy during the busts. The real issue isn’t if you will be stuck being a renter all your life. It’s weather you’ll be so scared about being shut out that you’ll buy at the markets peak and be stuck in a property you can’t afford or sell.”
It’s interesting to see that flippers are still active in Portland. A couple examples are two homes we saw in the spring. One sold for $540k and is now list at $800k. Another sold for $600 and is now listed at $700. apparently, they think the bubble is still intact.