“Price Reductions Are The Rule Of The Day” In Oregon
The Statesman Journal reports from Oregon. “Real-estate agents, such as Bob Riggi, spend their days working with buyers and sellers concerned about the recent cool-down in the housing market. Question: Has Salem experienced any consequences from the cooling of the national housing market?”
“A: I think it has. There is a 15 percent increase in active listings in the Willamette Valley MLS right now. Sales year to date are off about 4.5 percent.”
“Q: Subdivision developers have discussed building more than 5,000 housing lots in the Salem area. What effect will all these new houses have on the market? A: With the new construction, we are probably talking about South Salem and West Salem. There were 151 new construction sales, year to date, in West Salem. There’s currently 117 on the market. That means inventory is sitting out there. I think the upper-end homes are going to be a little more challenging to market.”
“Q: Is there any danger of an oversupply situation that would pull down prices across the board? A: I don’t know. My gut-feeling is there is going to be some corrections on the newer product.”
The Oregonian. “Klamath County broke new ground Tuesday by becoming the first in Oregon to rezone property in response to a Measure 37 claim, setting a precedent that could open thousands of acres in the rural Southern Oregon county for development.”
“Already on Tuesday, the commissioners heard 13 additional similar requests, said county planner Alwin Turiel. ‘It’s hard to even imagine the amount of development capacity that’s being created,’ Turiel said. ‘It’s almost mind-boggling.’”
“As of this month, individuals and companies have filed about 3,400 claims totaling roughly a quarter-million acres statewide under Measure 37, according to Portland State University. About a third of those seek the right to build four or more homes.”
“About 9,000 acres are the subject of claims in Klamath County, Oregon’s fourth largest in area and about the size of Connecticut. ‘We have one ranch that’s 5,600 acres, roughly the size of Klamath Falls, that would like to have one-acre minimum lot size,’ Turiel said.”
The Bend Bulletin. “Central Oregon’s slumping housing market may have cast a fog over sellers and builders this year, but it looks pretty bright to Carie Romain. The San Diego widow snapped up a house in Renaissance Homes’ new subdivision this week, paying ‘nowhere near’ the $770,000 asking price.”
“‘It’s a good investment,’ Romain said. ‘It’ll be soft for awhile, but it’ll come back.’”
“That may be true, but the 20-or-so brand-new homes that still stand empty in Romain’s new neighborhood bear silent witness to the 2006 market’s key factors: lots of inventory trying to attract a suddenly reluctant pool of buyers.”
“Buyers closed on only 102 single-family homes on 1 acre or less in Bend in October, down 59 percent from the red-hot October of 2005, but also down 48 percent from the not-so-red-hot October of 2003, according to the Central Oregon MLS.”
“Redmond has seen a similar fall, with single-family home sales slipping 26 percent below 2003’s monthly pace in September, and 53 percent off the pace of September 2005. October data was unavailable.”
“Price reductions are the rule of the day for homes that have not sold yet, an indication that sales prices may be on their way down. Of the 128 Bend homes that entered pending contracts in October, 70 percent had reduced their list prices in order to sell, according to broker David Foster.”
“The inventory of homes available for sale in Bend shrank slightly last month, from 1,429 at the end of September to 1,361 by the end of October, according to Foster’s analysis. But October’s number is still 259 percent higher than the inventory on Jan. 1, sticking the market with about a 9.5-month backlog of unsold homes, given the average sales levels of the last 12 months.”
“Some Central Oregon sellers have pulled their homes off the market, opting to rent them out until prices rise again, broker Becky Ozrelic said.”
“For the most part, she said, a standoff mentality has entered the market. Buyers who are interested and able to buy are waiting, hoping that prices will drop further. And sellers are snipping their prices incrementally, hoping to lower them just enough to entice a sale but not so much that they give too much away.”
“‘At some point, there will be equilibrium,’ Ozrelic said. ‘I think it’ll be a little while. But who knows how long a little while will be.’”
The lady from San Diego bought from one of the builders we’ve heard about here. Here is some Washington news:
‘The housing market tailed off across the state in the third quarter. In the third quarter, 43,050 homes were sold across the state, 16 percent fewer than a year ago. Sales declines were reported in all counties except Yakima, Grant and Thurston.’
‘In Washington state, the realtors’ survey showed that the midpoint price for an existing home sold during the summer dropped 11.6 from last year’s third quarter.’
‘In a preliminary study, the Planning Commission singled out Vancouver, B.C., ‘where the council decided to allow the substantial conversion of industrial lands, thereby changing the character of their city. Vancouver’s downtown now boasts lots of new housing development but diminishing prospects for employment. Development is not the only source of pressure. Land speculation has driven prices up in Ballard more so than anywhere else in Seattle, said Hawley.’
Here’s wishing everyone a safe and happy holiday! Check back tomorrow if you have time.
You too Ben…..
Happy Thanksgiving Ben and everybody on HBB!!
“‘It’s a good investment,’ Romain said. ‘It’ll be soft for awhile, but it’ll come back.’”
Sounds like the lady from San Diego does not have much confidence in the Fed’s commitment to remain vigilant against inflation. Because without a lot of inflation soon, I can’t imagine what would support a home price anywhere near $770K in a Central Oregon tract home development?
HAPPY THANKSGIVING Fellow Bubbleheads!
Crispy (TM)
Well, she at least sold her 1st place before buying. We have seen a lot of people with a full box of STUPID, having 2 mortgages, IO ARM, … (or CASEY). She still had dough left over from the sale in CA. I guess she has to live somewhere… It would have been better to rent, and wait out the typhoon, IMHO.
Happy Thanksgiving Ben and fellow bloggers
“It’s a good investment,’ Romain said. ‘It’ll be soft for awhile, but it’ll come back.”
‘Nuff said.
If she knew it was going to be soft for awhile, why not wait and see how soft it gets?
That’s just stupid.
because she paid ‘nowhere near’ 770K. She got it for a steal at 759K.
Plus upgraded granite counters. . . whoopee!
My guess was 695, but it’s all the same, isn’t it…
Yeah, AZ. Like we say to new workers worried about heights and falling; Over 10 feet it doesn’t really matter how high you are because the sudden stop is still the same.
And she thought she was smart paying $759K. LOL! What a dummy! Pure idiot! I bet its not even worth $500K…LOL!
“If she knew it was going to be soft for awhile, why not wait and see how soft it gets?”
insert imploder’s lewd double entendre comment here.
It’s Thanksgiving ……. There will be enough stuffed up the rear of the “house buying turkeys” in the months to come, without adding Carie to the list.
Softness hasn’t even begun to shape the market.
Ever heard of ReconTrust? It’s a name that we will all become familiar with. They are about to become the de-facto clearinghouse for the bust of ‘07, the Costco of residential RE dispositions. Interestingly, they a a wholly owned subsidiary of infamous COuntryWide Financial Services giant creative in RE lending. Looks like Angelo R. Mozilo has his eye on the full circle in residential real estate that he has himself created. Make loans that you know won’t be paid according to schedule, sell the loan to an unsuspecting 3rd party and own the company that’s responsible for disposing of it.
What a shrewd character.
Looking for a home in Los Angeles. Like going to the courthouse steps for an outdoors parking lot sale? Check this out. List has been growing geometrically.
http://www.recontrustco.com/property_results.asp?county=Los%20Angeles
Amazing.
Now is DEFINITELY NOT THE TIME TO BUY.
LOL. I was looking up some of the addresses in the Irvine area from this site. One up for auction wasn’t even built as of the last time Google Maps updated their satellite photography and it’s already up for auction.
http://maps.google.com/maps?f=q&hl=en&q=30+ANTIQUE+ROSE,+irvine,+ca&ie=UTF8&z=18&ll=33.702006,-117.761684&spn=0.002727,0.005724&t=h&om=1&iwloc=addr
Nice catch, AZ!
In the past few months the newspapers and news media along with statements from the Federal Reserve have been trying to soft talk the RE markets across the country by asking is this the time to buy? I live in Orange County (Irvine) and RE agents are now saying that everything will be good in the spring as buyers will realize prices are not droping here and prices will start moving up again.
What a crock of $hit!!!
I hear so much anecdotal evidence of people pulling their places off the market to wait for this fabled spring bounce now. Realtors will get what’s coming to them - inventory will balloon and the house of cards will finally collapse.
What are they doing with these pulled-off-market properties? Renting them at negative cash flow? (Boy, I would just LOVE to rent from such a landlord!)
That’s exactly what they’re doing, at least the specuvestors that I know. Hoping for a spring turnaround to bail them out.
What’s funniest is that, like with all things in life, it’s ALWAYS somebody else’s fault. Nobody made a stupid decision based on ignorance and greed. Instead, the builders built too many houses, or rates went too high, or this is just temporary and the media is blowing it out of proportion, etc.
There seems to be a big pullback in inventory up here in rainy (wettest month ever in WA history and we have 8 days left!!) Seattle.
Guess everyone is taking a deep breath and will exhale in the spring.
It is gonna be brutal…in the meantime all of us bears can now go into hibernation.
Only thing is, not every seller has the luxury of patiently waiting until spring. Many are already sitting on a NoD and in a panic. I agree in the spring we’ll see a change. We’ll see a lot more sales… only most will be REO sales. Get ready for the biggest RE bust ever.
But if prices are constant, instead of appreciating at 20%/year, will people be willing to overpay? With no price appreciation to “price into” the price (and the real possibility of losses), I don’t think most people on the sidelines are going to jump in in the spring - until prices go down drastically.
There may not be that many to begin with that are buyers. The boom sucked many people into buying to begin with.
Borrowed from the future!
I took interest in the “Bend Oregon” comments…I have been watching that market closely for a year now….You can’t believe the “Dumping on the Market” of approved lots thats going on right now….Lots of land speculation has gone on and they want out…They have no interest in building these out like they would have just a year ago…Probably could not get a construction loan anyway….
“Q: Is there any danger of an oversupply situation that would pull down prices across the board? A: I don’t know. My gut-feeling is there is going to be some corrections on the newer product.”
Huh? I thought new home prices were down 10%+ YOY already on a national level. Is it “different” in Salem?
Yea, the RE agents wear pointed black hats and ride brooms as they swoop in on their prey…..
I guess my last agent moved to Salem, cause you just described her to a tee.
I think there will be corrections on the newer product. Bend used to be less expensive than Portland, but it caught up a few years ago and is now more expensive. That said, Portland and Salem haven’t gone up much over the years, so there isn’t as far to fall. However, both those areas are not tourist areas - they have industry - so I don’t think they will fall far. However, Measure 37 could unload all the lots anyone needs for many, many years. And the condos in Downtown Portland are overpriced.
Salem is actually a rather poor area.
Ben,
The situation in Bend is getting worse each month. A Portland developer recently completed the infraftucture of a fairly large development on the NE side (utilities, pavement, etc). I drove by the development a few weeks ago and the developer’s signs were down and the lots are now being sold off individually by a local RE group. This same builder recently had a grand opening of another smaller development that was a total bust. A few other developments have come to a complete stop too. However, as the Bulletin article stated, there are still California buyers showing up with a “bucket of money and a box of stupid.”
I am seeing quite a few MLS listings making their way to the Craigslist rental section waiting for spring to relist. With our inventory up over 250% since Jan, this spring/summer inventory numbers should be the tipping point to finally burst this bubble as flippers begin to put their rentals back on the market.
The attitude of “we are different’ among friends and co-workers is beginning to sway and I am sensing that people in this town (other than the RE industry) are starting to see the “bubble light.”
Maybe you can build a fence between Oregon and California to keep em out. Damn immigrants!
“bucket of money and a box of stupid.”
The thing to remember when dealing (Talking) with realtors is never give out more info than needed. Never tell them …
Your occupation.
Your price range.
Your current status.
What you own.
They will pick out as much as they can to hike the price up!
Buddy of mine got suckered into paying above asking when
I have been reading this blog for a couple months now. I really like it, and it is very informative. As a Realtor, I find it interesting and I do understand how and why we are either not trusted or hated. Every profession, even my old one as a social worker, has folks you would really not want to spend too much time with. We all need to remember though, the builders and sellers have a lot to do with the overinflated market. I walk away from overpriced listings; sellers need to hear the honest truth from us about the market. Everyone deserves an honest advocate when buying or selling a home. For most folks, it is their only nest egg as they approach retirement. As a Realtor, I believe that we should not be able to represent both sides of a deal. I want either my buyer or seller to have an advocate and will make sure they do, even if it means less money to me. We live in the same community, and shop at the same stores and have children at the same schools. Who wants to hide at the check out counter? So, I benefit from dishonest Realtors, because they make it possible for me to have clients who have had a bad experience to know what a good one looks like.
We have friends who moved from the SF Bay Area and bought in Redmond six months ago. They are down 20% in value. They are not selling and took a 30-year fixed rate loan, so they are not hurting today. And here is the amazing thing….. there was no way they could buy in the Bay Area, so even with the price adjustment, they are happy to have a little terra firma and great schools.
“They are down 20% in value.”
Just think of how many nice vacations they could have paid for with extra savings equal to
20% X (bloated purchase price) - (six months rent on a comparable home).
The premium people are paying to own versus rent right at the moment is staggeringly high!
I tried to talk a co-worker out of buying in NE Portland for that very reason… but oh, no, they had to buy a $400K place. In 1979 there was a similar boom… realtors going door-to-door looking for places to sell and buy - in 1980, nothing sold. How soon we forget.
Then what happened? Tell us what happened to prices then?
15%-20% decline as I recall in many parts of SF bay Area. Portland may have been similar.
I suspect a lot of buyers weren’t even out of elementary school then.
P.S. I guess opportunity loss and direct loss are a different thing. Imagine how badly your friends would feel if they had $100K+ disappear from their bank account overnight…
$100k at interest over 30 years…works out to about double…which would go a long way in retirement. That’s a shame.
Beta, these people have no savings, buy a new car every 2 years, used 100% financing on the home, and have no concept of “equity”, except they were planning to get a heloc after a couple of years of appreciation and go to Disneyland with the kids….for the 7th time. Some people just don’t get it or don’t seem to care.
Kenny Rogers would say - They shouldn’t count their $$$$$ while they’re still sitting at the table. Wait till the comps start getting set by REO fire sales - won’t be long. That 20% will look like chump change.
I know people in the same situation. They plan to live in the house and could care less what the market is doing - they’re just happy to be able to buy something after 15 years of renting. I guess bubbles are in the eye of the beholder.
Indeed. One extreme example would be if a California Ex-patriot bought in say- North Carolina, they could buy a home there for 150k and have normal payments, or in many cases simply buy the thing entirely. Who cares if the prices went down even 50%? In that case, the house would not be holding your entire financial well-being for ransome. This is precisely the case in California: anyone who buys here will be pouring most of their income into a stupid house. A negative market means that they’re doing exactly what they thought they were doing when they rented: throwing money away. Ironic isn’t it?
Exactly right. The scale of the debt is what’s staggering. Lose 50% of $1.2M - OUCH. It’ll be walk away or pound salt forever. For those that have no mortgage, not selling into the frenzy was like walking away from a JACKPOT.
The whole RE maket is totally out of whack.
I knew a guy who worked in the Bay Area but lived in Solano County. He transferred to be the N. Carolina presence for his employer a few months ago.
He felt like had won the lottery. He grew up in NC and was comfortable there. He got to keep his nice CA salary, he could trade in his small CA house that he happened to buy at the last market bottom for a much nicer NC home and make the same payment as his CA home.
When he was selling his CA house, he just wanted to get rid of it and get on with his family’s life since the transfer was fairly rapid. So, he immediately listed it at 15% below everybody else in his neighborhood (he had equity; they didn’t). And sure enough, he sold it within a few weeks despite rapidly growing inventory.
His broker was getting nasty calls from the other brokers because it was hurting their comps. I’m sure it keeps him up at night.
Hope they are enjoying the rain….I know several CA equity locusts who actually moved back to CA because they could not stand the PNW winter. And that was last year. This year it is even worse.
This year it is raining harder, but I have still seen the sun at least once a week for an hour, compare that with last year which had at least 2 straight months of drizzle with no sun sightings.
WHERE did you see the sun? by the way… last year summer was on Wednesday. Bummer.
Sounds wonderful.
It has been raining for quite a while here in the Pacific NW. Hope all the Calf equity rich folks like mushrooms, because it’s sure wet enough. I drove into Portland the other day, and all the jersey barriers on I-84 are moss covered.
Can’t even ski up at the Meadows, Rt-35 is being rebuilt from all the floods.
MSM is again claiming Silicon Valley will be immune to the RE corrections across the country. The actual numbers suggest a different outcome at:
http://www.viewfromsiliconvalley.com/id281.html
I live in Rhode Island and have seen listings come off the market the last 2 months from an all time high of 7000 listings to its current around 6400. I recently overheard a real estate agent exclaim to a seller that it might be prudent to hold off on their listing until the spring because they believe real estate will be better then.
I think its going to turn out to be a huge mistake by waiting. Foreclosures in the last few months will end up on the mls by then as well as people getting their increases from not only ARMs but taxes and insurance.
All the people that have pulled out recently and anyone believing in a real estate recovery will be waiting for the spring. I anticipate things to get really ugly by the summer.
I dont think its a case of unaffordable homes, I think its a case of complete exhaustion in buyers. Anybody who wanted to buy real estate has bought because they were afraid of being priced out. Over 40% of mortgages the last 2 years have gone to people buying multiple properties. Sure there are first time home buyers but they arent looking for 500k plus McMansions. I believe the top end is going to crack first, these are the over leveraged speculators.
my mom has an old house in EG RI
treid to get her to sell in 05- no go
people forget 1990-95
off30%
“top end is going to crack first” - Yes, in a number of towns I’ve been watching, the structure of asking prices has gotten very compressed. For example, twice the (existing) house is offered for a price only 25% higher. Of course, perceived land value has something to do with this. But I’m guessing the basic cause is affordability, or to put it differently, a shortage of buyers who can pay these prices.
The Spring of 2007 for the RE Industry and Sellers won’t be the Rachel Caron’s “Silent Spring” we read about. There WILL BE Screaming, Crying and Elbow Jabbing with a Zillion other Used Cars Sales Tricks trying to sell these over-priced Equity Traps while Blood Flows ankle DEEP among the blooming TULIPS!
Won’t the REIC be discredited by then? I think that by next spring, the MSM will be picking up on what we HBB-ers have been saying for lo these many months.
Sometimes I think I’m the only person on earth who doesn’t understand why you can rent a home for 1/2 to 1/3 to 1/4 what it would cost to buy. I live on the beach in Tampa, and if everyone is moving here then why are rents so cheap? I’m so confused.
It’s like everyone who wants to rent can have a rich uncle who will subsidize their lifestyle by paying for most of the lavish housing expenses. If you can rent a million dollar home for $2500 a month is it really a million dollar home? It is if the owner is paying the other $2500 or more each month for you to live there.
I’m even more confused by this en masse accepted expectation that in the Spring all the buyers won’t mind paying 2-3 times a month to own a home what it would cost to rent. The buyers will be back next year…
I did write that letter a couple of days ago to a real-life potential seller in Treasure Island explaining to him why he is crazy. It was all true, and no I would not purchase his home for $500K; I was making a point.
Also, I just made an offer on a house based on actual math. I wrote the potential sellers a letter and showed that I was willing to pay 10% more each month to own the home than rent it (including the interest deduction), and I fully expect the sellers to tell me I’m crazy because that’s not the way it works…
People buy stocks with P/E ratios because it produces positive cash flow. For the life of me I can’t understand why people think it will be OK to buy a house as a negatively performing asset in the Spring or next year. It will all be OK next year because folks won’t mind it next year…
What do I know? I’m just a dumby from Oklahoma (who actually witnessed a housing bust in the 80’s…)
I’m even more confused by this en masse accepted expectation that in the Spring all the buyers won’t mind paying 2-3 times a month to own a home what it would cost to rent. The buyers will be back next year…
I too wonder how people can dilude themselves en-masse. But this stage of the process is denial. When that spring bounce doesn’t show up, we’ll move into fear. It will take 2007 to go through fear, desperation, and maybe into Panic.
I’m betting panic is when there isn’t a spring bounce in 2008.
We’re still on the time scale of this October blog entry of mine:
http://recomments.blogspot.com/2006/10/market-cycles-time-to-buy-2008-or-2009.html
Anyway, its time to go chat with family.
Neil
You have to ask the question: How many of these sellers have experience selling a house in a winding down market? So, when rents are actually much cheaper in the short-term, and maybe a decade out, versus getting a mortgage, one can not possibly think that sellers will be holding all the cards 4 or 5 months from now. What will the average equity be like for the new millenium purchasers in a few years? Will there be a plan underway by some Bernanke operatives to get each a seller a buyer?
The October stats from the Greater Tampa Association of Realtor show the October Sales at 1,577.
http://www.mfrmls.com/StatsGTAR.php
This is the lowest October number in 4 years. The inventory has climbed to 18,029. Thats a 11.43 months supply. I know lots of sellers have pulled thier homes off the market and are waiting for Spring 2007. The Spring bounce will be in inventory levels. This is going to get ugly in 2007.
If the real estate agents are saying, “Wait ’til spring!” then how are they going to make money until then? It’s not like they have some other thing to sell us besides houses…
question (may be a dumb one): typically, when they calculate months of supply data, do they use backward looking demand to estimate the months? wouldn’t that underestimate the months of supply drastically if future demand is much lower than past demand? i’m thinking about inventory accounting….if your product’s demand is declining drastically, looking at past sales and estimating your days of supply would be highly misleading.
I found this interesting what a local RE agent had to say. How do we know PDX has not overbuilt? This market has not reached the exhaustion point. How do we know if prices will come down here or will they just continue levitating in the air just out of reach?
http://realtytimes.com/rtmcrcond/Washington~Vancouver~gregherson
If you follow network or cable news you probably believe that the real estate market has gone from insanity where buyers were in bid wars to purchase unaffordable homes every hour to a market today where…nothing is selling! Perhaps a few words of reason are appropriate at this time of media-hysteria, and the first word is “relax.” Real estate is cyclical and life will go on at a more reasoned pace. It is important to know that the dreaded “bubble” was a localized phenomenon. Property on both coasts and a few Sunbelt and recreation-oriented areas such as Nevada and Arizona were the beneficiaries of double-digit price increases each year and 24 hour marketing cycles. The rest of the nation had home prices increasing two or three percent each year, homes staying on the market for three to five months, and a market that could not be described as belong to either a buyers or sellers. This really hasn’t changed in these areas. Sales may have dropped slightly as a reflection of rising interest rates, but homes prices never reached a level that could be considered unaffordable and the market is not self-destructing.
Recent figures from the National Association of Realtors show a supply of existing houses that would take 7.5 months at present sales rates to absorb and a new home inventory of 6.6 months. One year ago the absorption rate was 4.7 and 4.6 months respectively. These are national figures which may be heavily skewed by the building boom in Florida, Arizona, Nevada, and California where the availability of new homes will also impact existing home sales. The national inventory is totally a function of a slowdown in previously hot markets and does not necessarily mean anything in Portland and SW Washington. Price range is another variable that means a lot for sellers. As the price range increases so does the time to sell but a special house appropriately priced will always find a market in a reasonable time frame.
Portland and Southwest Washington, compared with some areas where markets collapsed almost overnight, simply shows a slowdown through the southwest suburbs and should simply return to more sane and sustainable market. In real estate, where the balance of supply and demand dictates all other market realities, the anemic supply of houses clashed head-on with soaring, almost over-the-top demand from buyers. Even seasoned real estate agents were taken aback by the intensity of the bidding wars. Through 2005 and into the early part of this year, successful buyers often paid tens of thousands of dollars more than the asking price to outbid half a dozen or more competing offers on the day of listing. In recent weeks, however, the air has been hissing out of the balloon. Housing inventories grew to 4.5 months in September, and signs of the slowing are showing up.
Oregon, and especially Portland, will have a milder cycle than the rest of the nation. 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.
summary: it’s different here.
Yah, we all know how that one turns out.
“Property on both coasts and a few Sunbelt and recreation-oriented areas such as Nevada and Arizona were the beneficiaries of double-digit price increases each year and 24 hour marketing cycles. The rest of the nation had home prices increasing two or three percent each year, homes staying on the market for three to five months, and a market that could not be described as belong to either a buyers or sellers.”
If those are the two options, then Portland is definitely more like Nevada & Arizona than “the rest of the nation”, at least in the past year or so. Appreciation was ~20% last year, nowhere near 2-3% of “the rest of the nation.” Granted, it did not get that crazy until last year, and it is already showing signs of fatigue now, so it probably will be a little milder than Nevada & Arizona (and FL, DC, Boston, etc.) here in Portland.
The author is creating a false dichotomy anyway. It’s not as if single-digit appreciation saved the Midwest from housing depreciation…
The idea that the market could levitate “just out of reach” is unlikely. All things considered, it is always more likely than not that markets revert to the historical trend. To my knowledge, there has been no revolutionary housing technology that would cause a permanent price shift. (Although modular housing is just on the horizon – this would cause a price shift downwards, or a quality shift upwards…)
Strong migration to the state is primarily driven by equity refugees from California; that will slow down soon enough. And the Urban Growth Boundary has been in place for decades. Why would it cause double-digit appreciation spikes all of a sudden?
And here in Arizona it IS different. After all, our local REIC keeps saying that EVERYONE wants to move here.
They overbuilt, but not by as much as Bend.
Don’t drink the Kool-Aid POB…we’ve all heard the “don’t worry” stuff before. You sound like a FB whistlin past the graveyard. Go back and read the numerous posts that are backed up by real numbers and analysis.
Just about every regular on this board has “done the math” in one post or another and we have all come to the same conclusion….This will be the worst RE disaster this country has ever faced.
Portland is toast.
Sorry for the bad news but the sooner you pull your head out of the ground the more likely you’ll be able to think for yourself and not just spout what the RE industry shills are peddling to try and keep sales from tanking.
For the record, I’m renting near the Pearl and was saved from buying a house last February because of what I read on Ben’s blog. I have read his blog nearly everyday since then and have done the math numerous times. While I do logically think there should be price drops here, sometimes it seems so slow in coming. I am concerned because of the urban growth boundary that we have not overbuilt unlike LV or Pheonix and our prices many hold up relatively well at least in the city core. I thought this was an interesting qoute to discuss these concerns. I’m not trying to shill RE, believe you me.
SeattleMoose - I think we can all agree that ALL housing markets are going to be impacted by the housing correction/implosion (or whatever you want to call it). But i think it also stands to reason that some markets will be less impacted than others. So even though this might be the worst RE market this country has ever faced, that doesn’t mean Portland will be facing as dramatic a downturn as, say, Phoenix.
I haven’t studied the Portland market, but it seems to me that with only 4.5 months’ of inventory, and less frenzied appreciation over the past 5 years (compared to say LV or Phoenix), it seems very likely that Portland might be set up for a milder landing than some other cities. I’m a firm believer that “it is different” in some markets.
And I guess this is my way of saying that maybe instead of saying “don’t drink the kool-aid”, “Portland is toast”, and “pull your head out of the ground”, maybe it’s time for a more nuanced discussion of the particulars of a specific market. The NAR has their trite sayings and clichés that they pull out to bolster the housing market, but we also have our endlessly repeated sayings trying to bolster our point of view. Maybe we should aspire to a higher level of dialogue than the NAR.
Portland_Or_Bust. Have you ever actually been to Portland?
Drive downtown and check out all the lofts that have been built and all of those that are being built.
There has been plenty of building in the Burbs.
PDX RE has double in the last 5 years. This is a nationwide bubble. No city will be spared. Not even Portland.
“Don’t shoot till you see the whites of their eyes”
I.E., I would suggest waiting until after the “funny money” loans have reset (next 2 years should do it) to really see what’s gonna happen in ANY market.
It’s not a nationwide bubble, but the bubble areas will drag the rest of the country down with them. You can still get 3/2 2000sf starter homes in DFW for well under $150K. You can’t tell me those are bubble prices.
My job requires me to drive around all of Portland(The Pearl), Lake Oswego, Beaverton, Hillsboro, Milwaukie and more. The shear number of new condo developments that are going to come on line next spring is staggering and this does not include all the new inventory that is currently for sale. There is nearly a sign on every corner and some days I see if I can go for more than two blocks without seeing a For Sale sign in front of an empty freshly painted house. Portland is going to crash hard. Game, set, match.
In the Pearl, the 121 unit Metropolitan under construction will be the canary in the mineshaft on how many flippers cancel this spring.
http://metropolitanpearl.com/webcam.html
I note nine “developer” held proporties have been offered since summer, and one appears to have sold recently. Hope springs eternal!
http://pearl-district-lofts.com/pearl-district-metropolitan-under-construction.html
Ya’ll have a good Thanksgiving. I’m heading out to have my dinner early at the Hare Krishna temple. Don’t laugh. The food is great. And the turkey is here. He walks around and says hello to everyone!
There’s still a lot we don’t know about you tx.
“Some Central Oregon sellers have pulled their homes off the market, opting to rent them out until prices rise again, broker Becky Ozrelic said.”
——————————————————————–
there has to be an absolutely gigantic hidden inventory of houses currently being rented by speculators for negative cash flow, waiting for phantom appreciation, that will hit the market over the next 1-3 years when the bleeding turns fatal.
A lot of people who are trying to sell in Bend (I live here) bought just a couple years ago when prices were much lower. Their problem is not negative equity. Their problem is simply that they can’t get the $700k from their $325k house that they thought they could get. They are mad, so they rent out the house–tons of rentals here now, and there were almost none at the beginning of the summer when everyone tried to sell all at once. It’s easy for the people who bought in 2003-2005 to get rent to pay the payment. But it’s next to impossible to convince anyone to buy at the price they think they deserve.
The holy grail now is “the spring.” It’s going to be a rout.
Exactly the same phenomenon here in Bozeman. But even with tons of folks (many I know personally) pulling their homes off the market until the assumed spring recovery… inventory is stable. Come March, inventory will jump well over 1000 homes.
The US Dollar is collapsing yet most economists belive the Fed will cut rates next year. Watch for hyperinflation under Ben Bukkake. The Chinese, Russians and Saudis are starting to diversify into gold and euros.
INFLATION BS!!! In the US, according to government figures, we have inflation running around around 2%. The true number is around 7%. That’s NOT taking into account the increase in home values. It seems the government inserts a nice little caveat when it comes to numbers. Where inflation is concerned, they state “Inflation numbers do not factor in in food, energy and housing.” In other words, they take out the biggest cause of inflation and if you don’t eat, don’t drive a car, don’t use electricity or gas and live in the desert in a cardboard box……..then they are correct. Inflation is running at 2%.
AND, the computer-power correction factor. They calculate the price for PC’s based on performance. So the price of a PC drops about 60% each year. PC’s are one of the components in the inflation calculation. Another beauty is the substitution clause. If sirloin becomes to expensive, then they use the price of hamburger patties instead.
I was in Fort Myers Florida this past week visiting my family, my dad had to take me for a tour through cape coral and up to the venice area (My Favorite) We watched as it seemed that in Cape Coral there are for sale signs everywhere. Venice isnt as bad but there is no shortage of inventory and prices have definitely fallen.
I overheard a couple by the poolside how another realtor friend said that they plan on coming down in the spring to buy condos in Naples. By that time she felt as though there would be a bottom in place and she’d be able to pick up something cheap before the market perks up again.
I think real estate agents are drinking to much Kool Aid believing everything Lereah says.
Meanwhile layoffs may really start picking up here going into the holidays as many projects come to a close. Construction workers, Loan Officers, Real Estate Agents, and anyone associated with real estate will be seeing alot more pink slips soon. That should make things even more interesting, as the fire feeds upon itself.
I also believe many realtors as well as the public believe the NAR spin . Never mind the facts . What main stream newspaper is going to print the real number price declines that should include the incentives ?
Jerry, I agree with you whole heartedly, the fed might not be in a position to lower rates. It might be prudent to have some metals in your portfolio to compensate. The dollar was down .60 USD today to a near record low.
The feds job is to protect the dollar but they may not defend it until its too late. I wish more Americans paid more attention to finance than to american idol and football. The dump sheeple deserve whats coming to them.
You might look into buying Euros or Australian Dollars to protect your savings. The richest people in the world are dumping the USD and will continue to do so. I hear the curency traders are also lining up against the greenback. Remember what they did to the British Pound and Thai baht.
ebay some lots in your hood
wow cheap now folks
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=140045282479&ssPageName=ADME:B:WNA:US:12
“I went up to take a look at the parcel. $140,000 and you have a deal. Fast Closing.
Nov-06-06
A: Hi, We feel as though the land is bargan priced at $199,000.00 compared to comprable properties in the area. We would consider $140,000.00 down and the . . .”
Cheap?? Compared to what. Amazing, FB’s still out there
Here is something I just read on Craigslist that would be interesting to discuss. I guess this is what I’m most concerned about. I remember my father in the 70s throwing in the towel and saying “oh well, I guess this is just how much houses cost now.”
Anyways, here’s the quote:
There was an economist who died recently who said that one of the main forces that determines prices in a free market economy is simply people’s expectations. It sounds axiomatic, but think about it…While at lunch today, I went to starbucks and got a medium sized(they don’t actually use the world “medium” of course) chai latte that cost $3.35. You could easily spend $5 on a venti cup of coffee with all the fixin’s. 15 years ago, somebody would’ve laughed at the thought of spending that kind of money on a cup of coffee. Something people were probably used to paying under a dollar for. But what starbucks did over the last decade was raise everyone’s *expectations* of what a cup of coffee should cost, and presto…people now no longer think much of dropping $4 on a cup of coffee because they’ve just gotten used to it. So the fact that the price of a cup of coffee has jumped so far ahead of inflation is irrelevent, people simply want their $5 latte.
I then got to wondering how much this phenomena effects the housing market. 10 years ago, a piece of shit in the ghetto asking half a million would’ve been laughed at. But could it be that people’s expectations of what a house should cost have shifted? I mean if you EXPECTED that a shithole condo should cost a million, you will actually feel like you got a steal if you bought it for $900k.
I don’t know, I’m just throwing this out there for discussion.
portland -
As soon as my wage increases to $1 million a year, $900K will seem like peanuts. That nothwithstanding, I expect prices to come down a bit.
I expect the usual haircut in Portland. 50% will be about right.
Speculation is speculation. Portland in not a high wage area.
It’s a nationwide bubble. Nationwide easy credit = Nationwide bubble. Once the denial ends prices will return to the long term appreciation averages. PERIOD
It’s a great observation regarding coffee, however I cannot see it holding true for houses. Virtually anyone can scrounge up 5 bucks for a cup of coffee. But people have no way of affording a $500k starter home on $35k per year. The money is simply not there. End of story.
You are right….for coffee. There is extensive market research determining what people will pay for different types of purchases. Starbucks prices their products so that they can be purchased easily from pocket money, and it makes then feel good.
You don’t have to go into debt for 30 years to buy an overpriced cup of coffee at Starbucks. You simply buy fewer groceries, or contribute less to your retirement, whatever. If you don’t have the $5, you skip the coffee today. Does not work for houses.
P.S. When the SHTF on this one, you can watch 1/3 of Starbucks in bubble areas close. When it comes to chosing between the house/HELOC payment and coffee, the java will lose. The $5 coffee will be a fond memory.
“The $5 coffee will be a fond memory.”
Among the cave’s artifacts in the proverbial “forbidden zone” will likely be a Starbucks cup.
From a reply to ed in Texas who mentioned this link in the bits bucket (I didn’t get to read the other threads, yet; so I apologize if this was discussed already):
Comment by CA renter
2006-11-22 18:27:49
Some snippets from the linked article. Very scary… Bold is mine
Housing has been presented with “an opportunity to move major legislation that we haven’t had for years,” Jerry Giovaniello, senior vice president of NAR’s government affairs group, said at the association’s annual convention in New Orleans earlier this month.
“We haven’t had a major housing bill since 1992. A lot of people have been left out of the 70 percent ownership rate.”
Regardless of who is going to Washington, there’s a good chance NAR knows him or her pretty well already, thanks to its million-plus-member grass roots system that starts with local elections and moves up the political ladder from there. “We know these people,” the group’s chief lobbyist said at the convention. “We make out friends before we need them.”
For six years, the group has been able to convince Congress to block a joint Federal Reserve Board-Treasury Department rule that would allow banks to move onto NAR members’ turf. But it has had to do so on a year-by-year basis.
Also next year, NAR expects the probable new chairman of the House Banking Committee, Rep. Barney Frank, to focus more on affordable housing and less on predatory lending. Describing the Massachusetts Democrat as “reasonable” and “pragmatic,” staff lobbyist Lynn King told a convention briefing that Rep. Frank “is no fan or regulators who attempt to legislate by regulation.”
Another “top priority” Realtor issue is flood insurance, which Mark Washko, another staff lobbyist — NAR has dozens — expects to be brought up early in the new year. NAR supports map modernization and higher premiums for repetitive-loss properties when their owners refuse government offers of mitigation. But it wants Uncle Sam to continue subsidizing second homes, vacation homes and rental properties that are in harm’s way.
…NAR supports a federally-backed catastrophic insurance program.
Moreover, with Rep. Maxine Waters, D-Calif., and Sen. Jack Reed, D-R.I., expected to head their respective housing subcommittees, Mr. Weaver expects affordable housing — and therefore the FHA — to have a “high profile” next year. “Both legislators are outspoken advocates for affordable housing,” he said.
Specifically, the NAR as well as other housing finance interests want to eliminate the FHA’s 3 percent downpayment requirement, increase its loan limits, raise the cap on loan terms to 40 years, allow the agency to switch to risk-based pricing, move the condominium loan program to the single-family loan fund, and strike the limit on reverse mortgages.
NAR also is a strong proponent of legislation to reform the government-sponsored housing enterprises. “We’ve got to get the FHA and Fannie Mae and Freddie Mac back on track and working in every state,” Giovaniello said.
As he sees it, the GSEs have “had their hands tied behind their backs” while the administration and Congress battle over which agency will regulate the agencies and how to control the growth of their retained portfolios. But not for much longer.
“Now I see something different,” Lereah said. “They will get a tough regulator, but they will be able to participate in a robust way once again. That’s very good for all of us.”
“We are the biggest association in America and I think the most powerful,” he said. “We should develop our own housing agenda and lead rather than follow.”
http://realtytimes.com/rtcpages/20061120_thinkingbig.htm
NAR needs to go!!! They do nothing for me. We don’t need realtors now. Look at the travel agencies…. This is total BS!!!!
To these idiots, affordable housing means 40-year mortgages and option-ARMs. This is unbelievable. They think that predatory lending actually helps the poor.
A former employee of ours left his Bay Area job to live in Portland because of the prices of BA houses. He bought his house last year which means he caught the peak just right.
The idea was that we would have to continue to pay for his services since he had us over a barrel. In the meanwhile, he was probably looking for a new job or other consulting gigs. All’s fair, right?
Well, time’s up. We eventually hired a replacement, we were no longer interested in his services, and the fact that he was still consulting with us for so long suggests that his new career wasn’t coming along as swimmingly as he would’ve liked. Good luck dealing with that new mortgage.
Amazing how many people plan huge financial decisions on the assumption that life will slavishly grant their every wish. Some people are lucky all the time, but most of us will be unlucky at least the occasional time. Would be better to plan accordingly, no?
Wino: “assumption that life will slavishly grant their every wish. ”
Funny, I was just thinking pretty much the same thing. Except that it seems that people ussume OTHER people are required to fulfill their every wish. And at the same time, they’d NEVER allow themselves to be so taken advantage of. Like somehow they have divine rights to scr@w everybody else.