“The Spring Market Will Tell The Story” In Oregon
A housing report from the Oregonian. “If you’re thinking that For Sale sign down the street is about to sprout moss, you’re not imagining things. New listings of homes for sale in the Portland metropolitan area increased 8.5 percent last month, while closed sales declined by 17.5 percent.”
“The result: homes are sitting longer and the supply of homes for sale is at its highest level in almost two years. In November, the inventory reached the equivalent of 5.1 months.”
“‘We’re transitioning to a buyers’ market,’ said Jerry Johnson of the Johnson Gardner economic consulting firm in Portland. ‘There’s an element of seasonality, but standing inventory really is more of an issue. We’ve seen it roughly double in the last year or two.’”
“He said sellers can expect to see buyers pushing for lower prices, and home builders discounting their new homes. Year-over-year price increases have dwindled to their lowest levels since mid-2004.”
“At seven months, Southwest Washington’s inventory, comprising homes for sale in Clark, Cowlitz and Pacific counties, is larger than the Portland metro area’s.”
“Agents think the next few months will be telling. ‘The spring market will tell the story,’ said (realtor) Brian Pienovi. ‘Everybody’s a little cautious about what’s going to happen this spring.’”
“Real estate agent Peggy Hoag said her telephone didn’t ring in November. Now, she said, pre-holiday activity is picking up as buyers sense bargains.”
“On the other hand, she said she’s seen a lot of sellers pull their houses off the market, both for the holiday break and their sense that the market was weak. Many of those listings will be back in January, she said. ‘I think we’re going to see a lot of new inventory out there in the new year,’ Hoag said. ‘It’ll be interesting to see what happens.’”
“(Realtor) Billy Grippo said he is having a strong December after ‘everybody froze up’ in September and October. But he was making no predictions for the new year. ‘I’m hoping the buyers show back up, because we know the supply is going to be there,’ he said.”
From Washington:
‘You might say the South Sound economy is about to go on vacation. Sit back. That was the message Thursday at the Tacoma-Pierce County Chamber’s Horizons breakfast. ‘We are slowing down, but we are not going to recess,’ said Goodman. The surprise, he said, came with growth in 2006. ‘The strength and duration. Two years, three years, we’ve had that. But not four years,’ he said.’
‘The flood of new condominiums will bring in people with higher incomes. Alan Justad said there were 430 condo conversions in 2004, but by 2005 that number had grown to 1,551 and in 2006 it was 1,916. ‘It’s unbelievable, there’s a big upsurge,’ said Sharon Lee, executive director a non-profit group. Lee said investors are purchasing units at a low price and selling them for two to three times the price they paid. This trend is happening in Seattle and the suburbs.’
From Oregon:
‘A drop in state timber revenue may squeeze, but shouldn’t break, Clatsop County’s budget this year. But with more substantial cuts expected beginning next year, the county could be heading into difficult financial times, officials said. Shortfalls of that size could require more drastic action by the county to balance its budget, Derickson said. ‘Should these projections hold to be true, it will be a very difficult time for the county,’ he said.’
Lee said investors are purchasing units at a low price and selling them for two to three times the price they paid. This trend is happening in Seattle and the suburbs.
“It’s a major crisis, taking affordable rental housing from working people out of the inventory,” said Lee. “It’s constraining people’s options.”
This sheds a little light on the speculation in the Seattle area which has been rampant. Like ALL bubble areas, it will crash hard. There are thousands of people with multiple houses, condos, etc. It may take a few years to play out since a lot of the pre-sold condos are not even completed, but I think the price declines will be huge. People forget, that from the late 90’s to early 00’s, there was a glut of rentals on the market which drove prices way down. The shortage now is only due to a lot of the units having been taken offline for remodeling, etc. Look for another glut of inventory in the coming years. Also, though many people are moving to Seattle, many people are leaving as well. For every transplant from CA who likes it, I would guess another 2-3 don’t because of the weather alone. The Northwest will never be the “IT” place to retire. Last time I checked, older folks prefer some degree of warm weather, something which is almost nonexistent there.
And another observation regarding the market there. I have been looking for acreage, so have been following land for over a year now. As the bubble has grown, I have seen more and more lower income individuals stretching to buy nasty trailers. As prices shot up, 30 year old single wides were selling, in many cases, for over $150k (many times over $200k). Now this may not seem like a lot of money, but for the folks buying them, it most certainly is. Especially as you go south to Lewis County, Mason County, etc. I talked to my realtor about it, and she said the lenders (appraisers) were valuing mobiles nearly as high stick built homes. She said the loose lending was absurd. I wasn’t interested in the mobile, just the land since it had septic, well, and power to the property. Lots of poor folks are going to end up losing their properties. It is sad, but I will probably benefit from their poor decisions.
“The flood of new condominiums will bring in people with higher incomes.”
How the F does building condos create high income jobs!!!! Do people with “high income jobs” live in condos? The high income people I know would find living in a condo a huge step down from their currant housing.
Those are not new, they are conversions. Sold to the greedy by the greedy. Why would anyone pay a high price for new paint in a place which used to rent for little.
‘The spring market will tell the story,’ said (realtor) Brian Pienovi. ‘Everybody’s a little cautious about what’s going to happen this spring.’”
Oh, the story will be told even before spring by the January and February inventory… Its that Joe and Jane sixpack won’t realize its a true buyers market until the spring.
Its going to be a buyers market for a long time. The only question is how long? How low? I’m a believer in a recession. I know others warn of depression here. We’ll see.
Invest in popcorn.
Neil
“Agents say the next few months will be telling”
Begins to sound like Feds saying the next 6 months in Iraq will be crucial.
Just keep saying it over and over again for any indefinite number of yrs.
I know others warn of depression here.
You’ll get there before too long. A national housing bubble assured a recession at a minimum. Throw in all the extras — record public & private debt, global credit bubble, global dollar bubble, etc. — and a depression is unavoidable. If you’re not scared, you’re not prepared.
“‘I’m hoping the buyers show back up, because we know the supply is going to be there,’ he said.”
Bingo — supply is going to be there for sure, but can’t say whether the buyers will show back up. Last year there was a shortage of housing, but now there seems to be a growing shortage of GFs…
“Real estate agent Peggy Hoag said her telephone didn’t ring in November. Now, she said, pre-holiday activity is picking up as buyers sense bargains.”
She had better hope so. It’ll take quite a few extra buyers over 2006 levels to make up for an increasing percentage of the subprime group that will find themselves shut out in ‘07.
Actually, in my neck of the woods, those bargain sensing buyers ARE entering into escrow, but those deals quickly fall apart when said buyers can’t sell their existing home, or the sellers do not cooperate with buyer demands. I’ve watched several pendings turn into BOM in short order. Right there, THAT is a big story.
These so-called “pre-holiday activity” deals are falling apart due to contract contingencies. Those numbers are being ignored by NAR and these hopeful agents….many many “deals” aren’t closing.
My aunt in Renton decide to buy another home before selling her current home. I had my mom warn her (my mom is a bigtime bubble believer) and my aunt said “Prices will never go down!” It has now been 3 months and the old house is still on the market. It was under contract on contingency but the buyer has not been able to sell their current home. So, NO SALE! The market is locked up bigtime. No first timers to speak of. Lots and lots of “PRICE REDUCED” signs in the Seattle area now.
We’re finally running into the end game. These buying contengencies will lock up the market pretty quickly. I’m sorry to hear about your aunt, but unfortunately, that is today’s market.
With the sub-primes taken off the table, we’re going to have situations where multple sales are held up. This could get interesting… As being unable to sell a condo might stall a townhouse sale that was driving the sale of a 4 bedroom and thus the McMansion didn’t close.
Spring… won’t be rosy this year.
Neil
It comes down to affordability. Sentiment has changed this past year. People who are in construction and other real estate dependent jobs are feeling the pinch. Job activity is not as robust and the guarantee of home appreciation isnt there anymore.
If the sub prime lenders start closing the doors it will be less likely that people will be able to get lower payments and have to go to a more traditional loan. I’d say we are 3 to 5 years away from any type of bottom. This year will probably contain the largest depreciation in home values, and the added whammy of sub prime loans unlocking.
Fear is indeed a powerful force and we havent even begun to smell fear. Everyone still has the rose colored glasses on even after 1 bad year. Fear wont take place until it becomes clear the buyers are exhausted.
Fear is indeed a powerful force and we havent even begun to smell fear. Everyone still has the rose colored glasses on
Agree 100%. It’s astounding how clueless people are about the risks they face. But we’ll see real fear in ‘07 when the market is deluged with inventory at the same time as both jobs and easy credit become more scarce.
What is the employment picture for Oregon — have heard they have low unemployment now and a future of strong job growth. If that’s true, their RE market shouldn’t feel the pinch like others with low employment; however, if jobs are on the wane in OR then all the “it’s different here” noise from realtors is just crap. Anyone in Oregon that knows which it is?
Oregon is a big state. Which area are you referring to? The economies vary from county to county.
Lane County is most interesting to me but curious about all the counties with high populations.
…and a future of strong job growth.
I always love these BS predictions.
Fear will begin to kick in in July/August 2007. By YE 2007, you’ll see deals you haven’t in a few years. By mid-2008, the foreclosures will really be stacked up…better deals even then. By 2008 and certainly 2009, many people who can afford their payments will consider walking just because they will be $200K-$300K-$400K underwater. They’ll figure seven years of renting is a better deal. Perhaps, but it depends on what the banks and government does with delinquencies and forgiveness taxes.
Why would buyers show up in the spring? Freakin everybody and their Mom already bought a house. People that had no business buying a home bought a home they now cannot afford.
I know its not this simple, but it reminds me of what I learned in economics. You sit down for dinner and buy a hamburger for $4, you eat a 2nd and 3rd, all for $4 each and now your full. Your offered a 4th hamburger for $2, you pass.
Bob and Re I think you are right on about the buyer exhaustion. Seems like everyone who can has partied and at some point no one is left to party. Those of us waiting on the sidelines will not join so the pool is dwindling.
I like to make the comparison to this: 70% home ownership/debtorship right? That means for every 10 people you see, 7 have already bought, leaving 3 potential buyers. 1 of those clowns you know can’t even get a toxic loan right now for any number of reasons, the 2nd guy is waiting like us (wise choice, I might add), the 3rd guy is the wildcard. SInce home wonership has always run about 64-67%, the 70% is way overdone, so that 3rd guy is probably not going to buy either. Probably just out of college, grad school, job transfer, etc.
So, it is only a metter of time before this whole thing comes down because there are not enough buyers left among the 3 out of 10 to keep it going. Even if the 7 sell to one another, there are still a lot of inventory left on the market and that inventory wants a return on investment. Builders and banks want the cash, not the house.
Just keep waiting, this thing has only begun to unravel.
The third guy is unemployable due to : homeless/lazy/in jail/mentall ill/sick. We all know people like this. Or maybe simply retired and renting in a old persons home/mobile home park.
I think there are way fewer buyers waiting in the sidelines than we think.
There are people moving to Atlanta who want to buy…we have buyers…EXCEPT, they can’t sell their home in New England, Ohio, Michigan, NJ, or Florida!
At least one out of ten has never had any interest in owning and never will.
And 15% will never be able to own at a given point in time.
And 5-10%, at any given time, can’t (for a number of reasons) buy even if they wanted.
That makes it likely that the maximum percentage of ownership is about 65-70%…where it is now.
‘The flood of new condominiums will bring in people with higher incomes. Alan Justad said.
That’s the ticket. Instead of any real development or real jobs, just create high-end housing, i.e. condos and watch all the wealthy people move into your little town. Yeah, it’s different here.
This is what makes this bubble so dangerous. I know we have beaten this horse dead, but the fact that so mny yahoos believe that this kind of economic thinking is sustainable is crazy. At some point, you can NO LONGER make money by hoping that some dope will come along and buy an overpriced, underbuilt PoS shack on zero land for WAAAAAAY MORE than it is worth.
This idea that moving junk around will make money is eventually going to run dry. In some areas it already has.
Anecdotally, seems my work pal has found a great fool to pony up the 600K needed to buy his pad here in South OC. The bonehead sold the house in Orange and is now ready to layout 129K as a down payment. A fool and his money… Anyway, I am somewhat happy for my pal, although he is just as greedy as the next guy and I will miss our talks at work. I think he realized that is is better to take the 5K less than he wanted and get out will the getting can be had, at this point. Just thought I would let you guys now how it went. Time on market, 2 months. Actually not bad.
As an aside, one thing I have noticed here in South OC is a lot more open houses during the week. I sense that the sellers realized they were all competing on the same days, Sat and Sunday, and realized they needed a change. Also, one realtor continues to offer hot Italian lunch with open house during the week. Next time, I think I might just visit for a free lunch during my work. And to think, someone once said there were no free lunches….Just kidding on that no free lunch thing.
“Build it and they will come.”
Anyone else think that the movie “Field of Dreams” was taken a little too seriously since then? Seriously. The “build it and they will come” mantra was repaeated aloud often and fuled the internet frenzy in the late 90’s. And that same mantra is causing developers today to believe that any residence that is built will attract lots of buyers.
Did anyone ever tell this moron’s not to believe everything they see movies? Also, the title itself should be a clue: “Field of DREAMS”…
Hey, build it and they will come worked for Florida in 1926, didn’t it? Didn’t it? Hello… hello… is there anybody out there?
WHO reads history any more? That is why it will repeat and it will be painful…..
Idiots ,sheep and sheople will all go over the cliff and nothing soft to land on!
No, the Field of Dreams mantra was not Build it and they will come. It was Build it and He Will COme. He singular. As in, one buyer.
Portland’s western suburbs are in for a lot of hurt - I haven’t see a “Sold” sign for more than 3 months on ANY of the for-sale homes - a few “For Sale” signs have disappeared (I’d guess about 2 out of 10), but they will be back in January, along with many more new additions to the inventory of homes on market. And they are STILL building new condos, SFRs and apartment complexes like crazy. Take the MAX train out west to Hillsboro and you’ll see the ongoing construction near almost every MAX station.
I wish I had taken a picture of the long row of 10+ For-Sale signs (for as yet unbuilt townhouses) on postage stamp lots in the neighborhood behind Costoco on Jenkins/Baseline in Beaverton. These signs disappeared a couple months ago and I haven’t seen construction start on these lots. Doubt they were sold.
And for all the hoopla about rents rising, rents are actually going DOWN in these western suburbs of PDX. Here is a typical example of a ~1500 sq ft townhome in a brand new development. These rents are a good $75-$100 lower than what they were in March this year.
Some of those developments baffle me. Particularly places like Orenco Station. It’s a great idea, certainly better than another McMansionville, but at a price point similar to a downtown condo, why wouldn’t people choose the real thing?
I think a lot of the builders and agents in the western ‘burbs are putting too much faith in Intel and Nike. I don’t know about Nike, but most of the people pulling serious cash at Intel spent years in grad school making $15k per year, and most of them are fiscally very conservative. The vice president drives a 15-year old Volvo, for crying out loud…
I’ve watched the neighborhood in my Southwest suburb of Portland for 8 years. Things are definitely slowing down. I’ve seen only one sale pending for many months, and the other houses for sale almost all have “New Price” on their signs and still haven’t sold after many months. There’s one almost across the street from me that never seems to run out of flyers. 6 months ago it was almost impossible to find a flyer at a house for sale. It’s definitely different now. I think for the last three months, our “months worth of inventory” has gone up 1 month each month, up to the 5 month’s worth we have now. Here’s to hoping this trend continues until prices are reasonable.
‘Within the next four months, nearly 60 South Coast lumbermill workers from Roseburg Forest Products in Coquille and Southport Forest Products in Coos Bay will have been laid off due to the tanking wood products industry.’
‘Meanwhile, an unknown number of employees at Southport Forest Products were laid off last Friday from the company’s Sumner plant. Bernhardt blamed the production totals on a variety of forces, but mainly the waning housing construction market.’
‘With housing down, there is less demand for lumber in the marketplace, which has led to an oversupply situation and a downward pressure on prices,’ Bernhardt said.’
‘With housing down, there is less demand for lumber in the marketplace, which has led to an oversupply situation and a downward pressure on prices,’ Bernhardt said.
This guy is a sticnkin’ genius with this comment. He should get a Nobel Prize in Economics for this one. I hate to pile on these guys, but they overstate the obvious every time they open their traps. Why don’t they just “keep quiet and let us think them the fool, rather than opening their mouths and proving it.”
Good stuff Ben. I think people forget how poor some of these communities have been when the lumber industries go south. They are still responsible for a lot of jobs, and when those go away, the local economies suffer bigtime. The trickle down effects are undeniable. Once construction layoffs pickup, a lot of the areas around Seattle and Portland are going to be in real trouble.
They’re not that well off when the timber industry is doing well. The Southern Oregon market seems to be driven by California equity refugees and retirees. The locals with jobs in the mill aren’t buying $500K homes.
What do you guys think, how far will the pendullum go the other way? In the mid 90’s here in Stockton CA you could by a $550-$650 rental for $50-65k, turn key just sweep out and rent. This was much better than the 10times rents thumb rule, $550*12=660*10=$66k value for $50k. That makes the rent/price ratio about 7.5times rents!
These same homes were selling for twice as much in 89′. I’m not talking about statistics, I mean the same exact homes were selling for half what the FB (their banks) paid.
My observation is that we are much deeper in this shit now than in 89′.
That above $550/mo rental in 90s now rents for $1100 and sold for $360k at the top, haha 27times rents! If this fell back to the 90s level of 7.5times (I think it will fall lower) those FB paid $360 for a home that will be worth $100k.
Yup $360k to $100k Ive been an agent since those early 90s and I don’t think this is an overstatement. If you realize that the $360 was the greatest of the GFs and the $100k buyer just hit three bars on the slot machine. The statistical making masses will fall much within that band and never realize how really far RE went up and fell.
Austin TX 3-2s SFH - 1300sf went for $80K (with 11% interest rates) in 1985 and could rent for $700 maybe. By 1989-90 one could buy one of these for $45K (with 9% interest rates) and rent for $550.
“The Spring market will tell the story”
I’m as busy as a spider spinning RE propaganda,
I’m as giddy as a baby on a granite-topped swing.
I haven’t seen a crocus or a rosebud, or a Greater Fool on the wing.
But I feel so gay in a melancholy way
That it might as well be Spring.
Easy now these guys are right! The spring will tell the story. It just won’t tell the story they want. It will tell the story of huge losses to be followed by another painful winter!
The bottom line is, no one can afford to buy in this market, unless you make super big bucks or have a nice inheritance. Regular folks, well…they are just out of luck. The median income for Roseburg,Or. is $19,000…and that’s going to buy, what???
I guess it depends on how you fill out the liar loan docs.