Oregon Is “Participating” In National Housing Downturn
The Register Guard reports from Oregon. “The median sales price of homes sold in Lane County hit $223,000 in September, continuing a trend that saw median home values rise 50 percent from 2000 to 2005. In contrast, median household income in Lane County went up 30 percent in the same time period. But appraiser Tawfik Ahdab says a measure of relief may be on the way for home buyers.”
“Many Lane County communities now find themselves in a ‘contraction phase,’ Ahdab said, meaning that the number of houses on the market is increasing faster than demand, relieving pressure on prices.”
“‘But more buyers are now ‘waiting out’ the market, to see if there will be price reductions in the future,’ Ahdab said.”
“At last week’s open house, real estate agent Mike O’Connell said,’ At a price of $209,900, some of them would be stretching themselves to the absolute limit,’ he said. ‘With the market the way it is, they need to ask themselves if they really should be buying a house right now.’”
“Mortgage broker Paul VanderPlaat agrees. ‘The old rule-of-thumb was not to pay more than 29 percent of gross income for housing, and not to have total debt, including housing, of more than 41 percent of gross income,’ VanderPlaat said. ‘Now many lenders are financing 100 percent of the sales price of a house, with an overall debt of 63 percent.’”
“Counting on continued price inflation that would allow homeowners to realize big profits after just a short time could lead many consumers to disaster if the market sours, and lenders have an obligation to educate home purchasers about the risks involved, he said.”
From KTVZ.com. “The month that ended with Halloween had both tricks and treats for Bend’s home sellers and buyers, with a big drop in sales, a big run-up in inventory (and) some big price reductions.”
“October home sales were off about 60 percent from the peak of Bend’s real estate boom a year ago, broker Rob Eggers said. Overall, there’s more than a year of housing inventory on the market, with the biggest run-up on the Westside, at 17 months of inventory, Eggers said.”
“‘Sellers have had to get very aggressive with their pricing to stand out amongst the competition. Unfortunately, for some sellers, selling their home is not something they would like to do, but rather, something they have to do,’ Eggers added. ‘As a result, those sellers have had to sharply lower their prices to get offers.’”
The Oregonian. “The Portland-area housing market has seen better days. New figures show the median home price in October was $270,000, about $5,500 lower than in September. The number of homes for sale is growing, and the pace of sales is falling.”
“‘There is a national housing downturn, and Oregon is participating in it,’ said Bill Conerly, an economist in Lake Oswego.”
“Local real estate agents and builders that the restrictive Urban Growth Boundary and the area’s ability to attract new residents shield it from the national housing slump. ‘If I were a praying man, I’d say thank God for Californians and the UGB,’ quipped agent Rob Levy.”
“The October RMLS report showed the market has 4.6 months of inventory, about double the amount in the fall of 2004 and 2005. By the end of the month, there were 11,533 homes on the market, 82.8 percent more than a year ago.”
“Closed sales fell 14.3 percent in October, compared with October 2005, the RMLS report said. That’s no surprise to Dave Hrabal, an agent with the Hasson Co. A year ago, he had two houses for sale and yearned for more, knowing they would fly out the door. Today he has 28.”
“‘The offers I’m seeing are just low,’ Hrabal said. ‘It’s definitely a buyer’s market. There’s just hoards of supply out there, and there’s just not that many buyers.’”
‘Several months ago, I stepped into Pearl District Properties to meet a chipper real estate agent. The next thing I knew the agent blurted out the one thing I didn’t want to hear: ‘it’s been so weird. We only had 10 condos for sale and now we have like 70.’ Well, now they have 253.’
‘A construction boom continued to drive economic expansion in the state despite indications of a national downturn, said David Cooke, an economist with the Oregon Employment Department. ‘We haven’t seen this in Oregon since the construction boom of the late 1970s,’ Cooke said. ‘There continues to be a high level of activity in housing construction in Salem, Eugene, Portland and Bend.’
From Washington:
‘The average price of a house in Hood River has tripled in the past few years and now sits at about $385,000. Most residents who attended public forums were disappointed with the scale and design of the new infill developments. They also had concerns about the new, large subdivisons. Many comments were also made about absentee landlords, both second-home owners and rental property owners,’ according to the report.’
‘Hull said the phenomenon of ‘flipping’ a house is catching on here, as well. ‘A lot of investors are getting out of the stock market, buying these up and flipping them,’ Hull explained. Agents acknowledge they’re doing well in this inflated market.’
‘Median sales prices have dipped a bit in the past few months, but remain high. ‘There are a bit higher inventories, some price reductions to sell,’ Simcock said.’
‘There has been a 400 percent building increase for condo projects in Ocean Shores, just in the last year,’ broker Steve Andrews said. ‘The market is showing that people want solid granite countertops, stainless steel appliances, top-of-the-line furniture, things like that. People also don’t want to spend what little time they have to relax mowing their lawn or fixing their house.’
‘Andrews says he knows that phrases like ‘next big thing’ are tossed around a lot in Ocean Shores, but he’s confident that the condo projects will succeed. ‘There have been false starts in this market ever since Ocean Shores was built.’ he said. ‘But there’s been so much investment over the last few years that I don’t think we’re ever going to go back to the days where you can’t give something away.’
from the comments section:
Posted by: Lynn S. | Nov 18, 2006 6:55:42 PM
My family’s been in the mortgage business for a long time. One of the last signs of an over-hot market is a condo explosion, just like the one we’re seeing here, followed by a condo bust. What’s disturbing about the overheated housing market, for me, isn’t the huge inventory of condos–though banks are going to find themselves suddenly with self-same huge inventory on their hands Real Soon Now. It’s the proliferation of those interest-only mortgages. People are going to find themselves upside-down right quick; they didn’t put any money down, they weren’t paying off principal, and then the value of their property drops. Hey presto! upside-down. Add in the folks who squeezed into their properties with adjustable-rate mortgages and we could have a real crisis on our hands. It could start looking a lot like the mid-80s around here.
All I can say to folks out there is that if you have to get an adjustable or an interest-only to get into a house or condo, wait. Wait until the market cools down, or you’ll be really, really sorry.
Lynn is pretty astute. Either she’s been reading here, or the knowledge is widespread and some folks are becoming aware of the true nature of all this magic money.
Thanks, Ben, for your concise and cogent comments on market conditions - your blog says it all!!! Hope you’re well compensated for your hard work. Chris
I’ve been driving around the Portland area quite a bit over the last year looking at real estate and what I’m seeing isn’t relflected in the Oregonian article. The number of for sale signs is amazing. I recently drove through Forest Heights, a new community with lots of McMansions, and was shocked to see 8 McMansions for sale in a two block stretch. Beaverton is awash in new homes and condos for sale. I veiwed two penthouses in the same building in the Pearl and both were listed for $580,000. A few weeks later I ran into one of the realtors and asked him how his listing was going. He said the owner pulled it off the market, because the seller in the other listing “panicked” and accepted an offer for $500,000. That’s a haircut. I viewed two condos in downtown Portland in a newer building across from the Safeway and both were being sold by flippers (they had never even been lived in). And there are several more major condo projects coming available soon. And I don’t think Californians will be able to save the Portland RE market because they will have problems of their own. Maybe Portland won’t suffer as bad as some regions, but it sure looks like it will feel the pain. It’s just a matter of how bad will it be. I’m guessing the real numbers are close to a 10% decline already and probably another 10% soon from the peak.
Enjoyed a summer rental in Ocean Shores last summer; returning to where I spent the summers of my childhood. Have relatives with summer and year round places there. One right on the beach — there are lots for sale on each side of him. One is $40k and the other is $140k (each .15 acre). The difference is one is offered by an investor; the other is offered by a local owner. Guess which is which. Oh by the way .. they have both been on the market for a over a year and no lookers. Take a ride of the streets with canals in the back yard, many for sale signs (some looking sadly weathered) but no sold or pending signs; my contact says it was even slower this fall.
Could you describe the area? Island, bay, etc.
Ben, the Ocean Shores is on a peninsula on the coast of Washington with beaches on it’s west side and Grays Harbor on its south. It also has a fresh water canal system. It is mostly sand dunes and cutgrass. It rains about 360 days a year. It has a hotel/resort section right on the beach which is a major tourist trap (moped rentals, seashell shops, local art, etc..). It used to have mostly isolated beachhouses a couple hundred yards inland from the beach, but now has capecod looking condos and houses lining up the beach. Nice place if you like rain.
I do like rain. More like Costa Rica rain, though.
The funniest thing about ocean shores is the condos that are right next to, actually a little closer to the ocean, the memorial for the lady that died when her house was washed out to sea a few years ago. The dunes are low lying and every few years the ocean decides to take a few houses down.
We visit Newport, OR twice a year, and we like to stay in the Best Western Agate Beach hotel, which is right on the beach behind the Walmart store at the north edge of town. When we leave we always drive the coast north through Lincoln City before heading east on the 18 through McMinnville to Portland. This summer we saw a “RE sign twirler” in King City just outside SW Portland. The traffic was very thick, and condos were being built where ever one could find a bare patch of ground. Strip malls and fast food outlets line both sides of the 99W through town — just too busy for my taste!
I live in King City, OR and have to say devlopment in the immediate area has been pretty slow. I can’t think of any major new developments in King City or Tigard on 99W for the last five years (so I guess it’s always had rampant strip malls
). In fact, the new developments tend to start towards Sherwood, OR (back down 99 towards McMinnville - but not by much). Sherwood seems to be growing exponentially at the moment.
I spent a lot of time at Cannon Beach, Oregon when I was a kid. I can’t even stand to go there anymore.
The article from the Oregonian is ironically titled “Portland real estate goes own way — up”. I hardly saw a bit of good news in that article besides we are holding better than California, and other major markets. I guess they have until June to get away with upbeat stories, by then our year over year appreciation stats should turn negative.
“The Portland-area housing market has seen better days. New figures show the median home price in October was $270,000, about $5,500 lower than in September. The number of homes for sale is growing, and the pace of sales is falling.”
Wow, I can’t tell you how great this is to see this in print. It has been a long time coming.
In Sept ‘05 we found a house in Medford on the market for $385K. Just a few months prio, houses were going over asking but the market seemed to be turning. Even though the house had been put on the market a month earlier for higher than $385K, we bid $365K and held firm. Our offer was accepted but we backed out over other contingenices. The house finally sold May 2006 for $340K. Now other comparable properties are on the market at around $310K asking. I’d say Oregon has been participating in a decline a lot longer and deeper than these articles would indicate.
Also, after showing the decline to $340K for the May sale, Zillow is now valuing the house at $385K. Anyone else finding Zillow is WAY out of line, and WAY behind the curve?
zillow is a joke.
It is a joke. I just looked up a house on zillow, which we considered back in January. It is an ugly split-level from 1972, never updated with original everything, yet great location in the West Hills with good sized yard. It sat on the market $329k for about 8 months. It finally sold in June for $325. Not much appreciation in that neighborhood since June. A friend in that neighborhood had to reduce her price to sell her house. So zillow is showing this house with a zestimate of $371k now. No freakin’ way! My favorite part about zillow is the sales history. It puts things into perspective fast.
Zillow is at least 3 months behind….just NOW starting to show CA declines.
The ‘Zestimate’ pricing is pretty worthelss. But, as portland pointed out, the other information very useful.
I’d say it was a tool to dupe buyers into spending way too much, but then I come across houses that are WAY under Zestimated.
Forget the pricing. Rather use the history of what the homes sold for.
If you saw a house for sale and say zillow states it value at 800,000 but its history says sold for 250,000 say 3-4 years ago. Thas a warning sign.
Its how you use the tools that counts.
That is pretty cheap for the West Hills. Just out of curiosity, what street was it located on? Thanks in advance.
He can’t mean West Hills, LA, CA, I know that much!
True, Imploder! When I lived there in 1998, you could buy a nice 3/2 in West Hills for about $200K — with a pool, even.
At the peak, that same house would sell for around $650K. BIG difference between a $200K buyer and a $650K buyer; one’s a regular working guy/gal, the other’s a corporate executive, IMHO. Those prices will see $250K to $300K (or lower), inflation-adjusted, by the time this thing is over, IMO.
“Anyone else finding Zillow is WAY out of line, and WAY behind the curve?”
I think that “Zillow” is a trap.
There are two ways to estimate:
1.Look back ( 2001 ) and add ( 1-1.5)% for each year.
2. Use common sence( be alone when doing this for at least 2-3 h).
Let them sweat.
Who has that kind of money in MEDFORD?
Medford has been repeatedly cited as a major bubble area. Just take a look at Realtor.com and check out what asking prices are now as opposed to 5 years ago.
‘ I’d say Oregon has been participating in a decline a lot longer and deeper than these articles would indicate.’
IMO, that’s been the case with every bubble area.
WOW Ben,
These articles are certainly getting gloomy.
Maybe it is different this time and the downward spiral will happen more quickly.
IMO, that’s been the case with every bubble area.
————————–
Yes, all through 2005, we just heard the “happy talk” from the REIC. Now, they are talking about the slowdown starting in 2003 (sales peak in SD, for instance) and 2004. I wonder if they’re not trying to add years to the downturn in hopes of convincing buyers we are “at the bottom” because X number of years have passed since the slowdown began.
A friend of mine bought a big second house outside of Hood River (which is in Oregon, BTW) about two years ago. He had two people bidding against him for the house - one from San Diego, and one from Naples, Florida. When I heard this, I laughed, and said: “Today, I don’t think they’d be pulling equity out of their houses to try to buy this one.”
Hi I just want to thank Oregon for coming and remind everyone to pick up their FREE t-shirt at the information desk.
Yes, it’s about time we came to this party.
Yea is says:
“I bought a house in 2004, and now all I got left is the fu@kin T-shirt.”
Here is a post from a real estate agent’s blog:
“Portland Monthly Tidbit
Portland monthly runs a footer called “PDX Index” across the bottom of the “mudroom” department each month. This month has a couple real estate related figures (pg 30).
Percent population growth in Portland between 2000 and 2004: Four Percent
Percent pouplation decrease in Los Angeles between 2000 and 2004: Nine Percent”
Does anyone know what a more typical rate of in migration into Portland is? Alot of people here are planning on Portland becoming the next Seattle. What rate can we plan on once California prices come more in line with a market based on fundementals?
From what I can remember, Portland was one of the hotspots for CA emigrants during the last RE cycle. Seems a lot of Californians like the idea of moving to OR because they hope to find the more laid-back, less congested, natural lifestyle that CA has lost forever due to the extreme in-migration here.
I moved to Portland in 1994 so I could buy my first house.
Portland has always thought of itself as the destination for many ex-Californians and to a certain extent the thought is correct. But this is not something new. When my parents moved from Southern California to Portland in the late 1970s, a lot of other ex-Californians migrated too. I have always wondered how much of this happens. 2-4% sounds about right to me as it has gone on for decades and I recall one point in the 1980s, a proliferation of bumper stickers telling Californians to Go Home (natives felt the city was getting to crowded.) Basically, all of this “California” noise is so old and I doubt there is any mad rush to Portland. It’s a nice city, but it has a very low paying job market — mainly service industry with a minor tech boom from the late 1990s.
I grew up in Oregon. And we used to always say,
“California is Oregon’s Mexico.”
Bingo!
I’m here for the cheap housing. PDX is a nice place, but not a place to be on the career fast track unless you own/start a company.
I moved to Portland for the lifestyle in May of 2006 - I’m lucky in that my career pays well no matter where I go.
I’m not dumb enough to have bought a house here though - I’m renting a nice place and piling up the savings.
50,000 people moved to Oregon last year.
The median sales price of homes sold in Lane County hit $223,000 in September, continuing a trend that saw median home values rise 50 percent from 2000 to 2005. In contrast, median household income in Lane County went up 30 percent in the same time period.
These guys aren’t doing so bad - a 20% real run up in home prices over 5 years is mild compared to what much of the US has seen.
“Many Lane County communities now find themselves in a ‘contraction phase,’ Ahdab said, meaning that the number of houses on the market is increasing faster than demand, relieving pressure on prices.”
Geez…this sounds like an unpleasant bowel movement.
LOL….spit my drink out .
“The old rule-of-thumb was not to pay more than 29 percent of gross income for housing, and not to have total debt, including housing, of more than 41 percent of gross income”
And any loan officer/bank who signs off on paperwork which violates the above should be held accountable. Yes, this means STRICT rules regarding loan qualification with all the associated paycheck stubs, savings statements. etc.
In summary, a return to common sense and accountability…..
Make sure to hold the lawyers, which work for the mortgage sharks, accountable also. I’m sure they have the clients best intrest in mind! Sign, sign, sign, Oh what does this mean? That’s nothing,,,, just sign, sign, sign………..
HA….Those lawyers will jump ship and start representing the FBs.
Absolutely! I bought a house in 1996, and banks would not loan more than 2.5x or 3x gross annual income. Period.
You also had to have a downpayment, no credit card debt, money in the bank and stable income. There’s no way this landing is going to be pretty…
Any landing you can walk away from is a good one.
~Launchpad McQuack??
Here’s a good one Ben.
Chain link fences being stolen for scrap.
But keep in mind we are NOT experiencing inflation.
From the article:
“A copper dome was removed from a Cleveland church.”
Wow.
American style capitalism has become privatization of profits and socialization of risks. It’s perfect for the insiders/crooks with the right connections.
Ask the Hood River buyers from out of state to share their love for the area around February when there’s a few inches of ice on the roads and the winds are blowing 40+ knots. Winters can be BRUTAL. To be fair, the summers are absolutely fantastic; all four weeks……..
Yes, at the moment, skiing is difficult, as 25 miles of the road to Mt. Hood are closed - likely for a good part of the winter.
Anybody have any info on the Bend market?
Yes, Yes is it over? Is it Bend Over?
thinking of buying a pre-foreclosure house 2000 sf built in 1989 for $120K. i think i should be able to get even or positive cashflow on it. it was listed in august for $145K and been dropping like a rock
Where is that house located? Are you a RE pro, or just getting started.
Sounds like a good deal if it is located in 75080.
Sounds like a bad deal if it is located in Buffalo or Idaho, or any other silly place over 500mi from shore…
Actually in Boise that’s a good price.
Ben-
Time to start the Commercial Real Estate Bubble Blog:
$20 billion plan to take Equity Office private
SAN FRANCISCO (MarketWatch) — The Blackstone Group is set to announce a $20 billion takeover plan for Equity Office Properties Trust in what would become the largest such “take private” and the largest real-estate deal in history, according to a media report Sunday.
Ratification of the offer from Blackstone’s real-estate arm to Equity Office the largest U.S. office-building owner and manager, could come as early as Sunday night, The Wall Street Journal reported in its online edition, citing unnamed people familiar with the matter. See Wall Street Journal story (subscription required).
If the deal is ratified, Blackstone is expected to pay about $48.50 for each share of Equity Office, The Journal reported, representing about a 10% premium to the Chicago-based company’s Friday close of $44.72.
The deal would be the largest real-estate transaction and take-private, factoring in Equity Office’s $16 billion in debt, The Journal said, and continues a trend of taking public companies private.
Equity Office’s management, including its founder and public face, Sam Zell, are not expected to be a part of the buyout group The Journal said.
Check out this post on Craigslist that was left in response to the same Oregonian article linked on Craigslist that Ben cites here. We are getting some real honesty here from a RE agent in PDX.
makes me groan reading the disinformation 11/19 21:50:32
I am a licensed real estate broker….
some back story….
I am an average joe like everyone else…blah blah blah.
enough of the backstory.
It makes me groan with the emails I get from pmar, omar, nar, etc. and the articles I read in the Oregonian about how well the oregon housing market is doing.
The damage control that comes out of Realtors mouths and their organizations (listed above) and RMLS makes me groan everytime I listen to the propaganda.
Bottom line, the housing market in Portland stinks, You have sellers that listen to the real estate agents and overprice their houses because they dont want to face reality and lose out on more commisions by lowering the prices of houses.
It is just greed, plain and simple. The median household price is so out of whack with what average people can afford. With interest rates going up the prices should be coming down.
The most recent I have seen is housing starts are in the toilet yet the Oregonian reported that Oregon housing prices have appreciated. Give me a damn break. It is based on statistics from RMLS and is flawed because it is a conflict of interest because the realtors are inflating the housing prices.
Its time for the brokers to do their damn jobs and quit being so greedy. You have an ethical duty to not only your client your buying or selling for but to the other person also…..
so take your fiduciary responsibility seriously and quit ripping people off.
bunch of damn jackals.
I’ve been watching a place bought by a flipper/RE agent last year for about $300K. They logged the two acres it sat on, and added maybe 20-30K of improvements. It went on the market at $599… sat… went down to 499… went off the market, then back on, then had a sale pending sign, now it’s back on again, at 499. Meanwhile this realtor is building a place that must have $300K going into it, at least. It’s become sport to watch, as I pass both places daily on my way to and from work.
I have a friend who moved to Grants Pass from Calif a year ago last August and immediately purchased a new home on an Acre of land paying $500,000. I had told him to wait but he said his area is different according to his RE Agent and will only go up as everyone wants to retire there .
Has anyone got any data on this area lately? Beside Zillow.