Portland Housing ‘Can’t Levitate Forever’
The Oregonian reports on the housing bubble in Portland. “The median home sale price in the Portland area was $242,000 in February, 17 percent higher than a year earlier, according to numbers released Tuesday by the Regional MLS. That year-over-year appreciation number was lower than in any of the previous six months. And the median price dipped by 1.5 percent from $245,800 in January, the second consecutive monthly decline.”
“Market activity also dipped year over year, with the number of closed sales down 1.3 percent and pending sales dropping 8 percent.”
“‘I do think buyers took a break from the market,’ said Kathy MacNaughton, a Northwest Portland broker. MacNaughton said some of her buyers were showing a level of ambivalence because they worry that the Portland market won’t be able to sustain current levels of appreciation.”
“The supply of new condominiums is gradually increasing. And the belief abounds that the market can’t levitate forever higher.”
“Central Oregonians have grown accustomed to making Top 10 or Top 20 lists of all sorts, but the latest could give all whose livelihood (or nest egg) depend on the local, long-lasting real estate boom pause: A just released report puts Bend at No. 11 on a list of overpriced real estate markets.”
“According to a study by financial information provider Global Insight and National City Corp., Bend’s fourth-quarter median home price of $256,200 is 68.4 percent overvalued.”
…..And the belief abounds that the market can’t levitate forever higher.”
I’m always amazed at the new words and new USE of words that this decade’s boom/bust has generated. It would be fun to see a list of those words/phrases at some point.
BayQT~
SFBayQT,
I have not updated this list yet with bubblespeak specific to the housing market. It reflects the equity markets around 1999-2000. But you can warm up on it:
Bubblespeak
Hey, thanks for directing me to your glossary. When you update, you’ll have a little bit of work to do.
BayQT~
great glossary, thanks!
Nice start. Here are some recommended additions or modifications. I am sure that you can get other readers to add to or improve on my off-the-cuff definitions.
———————————————————————————
pump-and-dump
(verb): To tout, or promote a stock so that the promoter can sell its own shares after interest has been generated and the stock price has risen.
Example: Robert Toll pumped-and-dumped his company’s stock shares.
———————————————————————–
normalcy
(noun): The hypothetical condition to which a market returns after several years of rapid, unprecedented, and unsustainable price gains.
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buy-the-dips
(verb): A stock market investment strategy advocated by long-term buy-and-hold investors, which consists of purchasing additional shares of a stock every time its price declines by a substantial amount. This strategy resulted in massive loss of household and institutional (e.g., pension fund) net worth after the tech stock crash.
—————————————————————————-
suicide loan
(noun): A loan (such as an interest-only option ARM with 100%+ financing) which is made to an individual on the underlying assumption that either the interest rate on which such loan was based will remain permanently low, or that a high rate of home price appreciation will continue for the foreseeable future, or both. These loans enabled individuals who could not afford to buy a home at inflated price levels on a traditional fixed-rate mortgage with a downpayment requirement to purchase homes. If the interest rate on these loans reset to a higher level or price appreciation gave way to falling prices, such loans would turn out to be suicidal for the buyer’s household net worth and/or credit rating.
—————————————————————————-
bankruptcy reform
(noun): A new law passed in the Fall of 2005 designed to make it more difficult for bankrupt households to walk away from their debt, and which had the unintended consequence of turning a substantial number of former homeowners into permanent renters and debt slaves.
——————————————————————————–
debt slave
(noun): An individual who went bankrupt after the Bankruptcy Reform of 2005 and who discovered that it would not be possible to walk away from the amount owed by filing Ch. 11. Such individuals are destined to continue working in order to pay off their debt, and find it very expensive to borrow money due to the huge share of their income which is dedicated to paying off past obligations.
——————————————————————————–
appraisal fraud
(verb): The act of overstating the appraised value of a home in order to allow approval of a mortgage contract at an inflated price over the actual value of the home.
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gse
(noun): Government sponsored enterprise. This term refers to entities such as Fannie Mae and Freddie Mac which were chartered by Congress to supply liquidity to the housing market through purchasing loans from home lenders and bundling them into securities known as MBS (mortgage-backed securities) to be resold to investors.
—————————————————————————-
get stucco
(verb): This is a reference to a Groucho Marx line from the movie Coconuts, which parodied the Florida Land Boom of the 1920s (”You can get any kind of house you want! You can even get stucco. (Under his breath): Boy, can you get stucco.) This describes what happens to homeowners with suicide loans when either interest rates rise or home prices decline. (Interest-only loans were very popular in the 1920s, and have only recently made a comeback.)
—————————————————————————-
permanently high plateau
(noun): An expression which is often unwittingly paraphrased by real estate experts who are quoted in the mainstream press to describe their belief about where housing prices are headed over the next several years. Unfortunately, the expression was originally coined by Yale University economist Irving Fisher to describe the state of the stock market in 1929, just before the Great Crash.
—————————————————————————–
fucked buyer
(noun): A buyer who bought a home at the all-time high price on a suicide loan contract, only to subsequently get stucco.
—————————————————————————-
realtor
(noun)
1 in 10 people in California
OT: ‘The frenzy is behind us’, from the OC Register.
Sales sluggish last month, but prices resumed their climb.
http://tinyurl.com/mcvtq
Ben,
OT……I just visited zillow to check on the Berkeley , CA house that I owned almost 30 years ago. I discovered that the tenants we sold it to (it was a duplex) sold it 10 yrs later, but the amount that sold it for relative to what they bought if from us for AND the current zillow value is eye-opening.
1979: purchase price, $39,000
1989: sold at $208,000
1999: sold at $114,000
2006: zillow value, $649,600
This is the old place that I mentioned before that was built in 1907….redwood panels in the dining room, 5-6″ baseboards, redwood pocket doors between the living and dining room (with fireplace), built-in china cabinet with pass-through door to kitchen…..a great house. We took 2 years to repair and remodel, with the help of a 3% Berkeley redevelopment loan. A LOT of work was done on that house.
But did you check out the HUGE dip it took in 1999?? It took almost a $100,000 hit. THIS is something that I can show people who don’t believe that prices can tank. It has before…it’s doing it now….and the fat lady hasn’t sung yet.
BayQT~
THIS is something that I can show people who don’t believe that prices can tank.
Alternatively, the zillow.com data is wrong on the 1999 sale. I’ve noticed similar oddities when checking the history of house sales, and I’ve assumed there was a data glitch.
Can anyone recommend the best way to check that 1999 sale? Is that kind of information available via public records?
BayQT~
yes
Thanks Wizard.
BayQT~
Based on CPI the current price should either be around $130k based on the crash price or around $315k based on the sale prior to that. It seems like the Zillow analysis will end up including this kind of informal projection as well, but that might be after the crash as an attempt to rescue their reputation?
Defaults, foreclosures up from year ago, from the OC Register
http://tinyurl.com/nkwve
I live in the Central Oregon forest near a small town which is about 25miles from Bend. The California speculators are all over here ( which is the middle of nowhere). They are buying one acre lots and building new 2000sf homes for $160,000 and trying to sell them for $270.000 plus. The problem is none are selling! They have been sitting vacant since last October. I have one right next door to my property, the heat and lights are on but nobody is home. This Ca owner is now talking about renting it out. Everyone here thinks once the snow melts the buyers will come and home prices will continue to rise because ” this is not California and Oregon is different” they keep saying ! Most of the jobs in this area are construction or remodeling related. Rents here and in Bend are $700-800 mo for a average three bedroom two bath place. Bend and the small town I live by has many new communities with hundreds of new homes being built as we speak. The attitude is the sky is the limit for future housing prices. The traffic in Bend is starting to get as bad as OC with all the new people arriving. I think the people here fail to realize that once Ca goes down the tubes, all the Ca money here will dry up also and we will be in the same boat.
exactly
My good friend just moved from San Diego to Bend about 3 months ago. Got out of the SD market in the nick ‘o time and cashed out big time. He is renting while his big home is being bulit in a development by the river. He told me last night that since he’s bought it, it has gone up 50k in ‘value’. He’s now talking about buying an investment property in a small town near Bend. He justifies the increase and the investment plan with all of the standard realtor related gobbldy-gook we’ve all been so acustomed to reading. Lord have mercy!
There goes his big time cash out.
BayQT~
There is a big problem with buying and renting out a “investment property” in one of the small towns ( mainly the La Pine area ) near Bend. Rental prices in the La Pine area are the same as in Bend, and the only place there is work is in Bend. Everyone commutes to Bend 25 or more miles one way. And not just to work but for groceries, clothes, ect. The only people that own homes here are snowbirds, locals who were born here, and people fed up with the big city-(me). There is NOTHING to do here besides hunt, fish, and shovel snow in sub zero cold during the winter. The guy who built the house next to my property made a interesting comment when I asked him if he was going to live here. He said, ” Hell no! I live in southern California and love the weather out there, I could never live here!”. There is also a nice rental property across the road from me that has been vacant since Feb ‘05. No one is going to rent in the La Pine area and work in Bend unless they rent a $300.00 a month drafty shack ( there are allot of those here) to save money and battle the snow in winter to get to work. But gas is currently $2.49 a gal locally and climbing, so even that is foolish. I can say one positive thing out of all this, these investors have bought up a lot of the run down properties in my neighborhood. They cleaned and fixed them up or completely cleared the land and built new. My area is looking real nice. That is something the county has been trying to do for years!
theres a nice bar in wickiup jct ill buy ya a beer in the spring i love to drift the deschutes and catch those big browns.
DJ,
$57,000 around my parts (North San Diego County) would get you a cardboard box that a stainless steel refrigerator came in, (with a view though).
I understand what your’re saying, my friend was talking about a $57,000 house. What does that even buy you in one of those small Bend ajacent towns?
Dosen’t sound like much to me in any market, but of course, I’ve never been there.
Sounds great. I’ve been there too and fishing the Deschutes should be great this year ( it always is after a bad winter).
A unimproved acre of land here is $80,000 +
Maybe your friend found the deal of all deals as a livable 3/2 mobile home on one acre here is averaging $130.000-180.000.
Interesting. The same is happening in northern AZ…Prescott, Sedona, Flagstaff…towns much like Bend in many respects…they also attracted CA speculators. Now that the CA properties aren’t selling, (that provide the $$$ for all these “projects”) there are increasing cancelled orders/contracts on new and resale properties here…and increasing inventory/rentals, many owned by CA sellers.
There is glut of new home rentals (or, to my great amusement, “gorgeous remodeled historic home in great location”..ie…granite countertop in an old pos) in the local classifieds, most w/ CA contact phone numbers. And that’s not even counting the ones that have management companies deal with their rentals.
Many contracts that are contingent on a buyer’s CA home selling are getting rejected….some sellers are greedy, but some see what is happening in CA.
Bend and Medford don’t have the financial underpinning of technology employers nor a University system to develop the workforce that will address future industrial demands. A city full of older Californians needing bypass surgeries and care givers, and the indigenous un-educated at the opposite end means trouble ahead, IMHO.
This sounds a little like the Big Island too. So many people here built houses for $100k in 2003 an sold them for $300k in 2004. Adjust upwards for 2005. Most jobs $12-15/hr are in construction. It’s a 2 hour minimum commute to the nearest Walmart. And now the traditional rain is back, pouring for 6 weeks — compared to the drought of the past 7-10 years during which time everyone wondered why no one had ever built on the wet side.
Friend who cashed out of a house in 2005 met with a realtor recently to talk about buying a small piece of land (now that land prices are falling with huge inventories) and building again. Said the agents in realtor’s office were buzzing insanely around just because there was someone in the office who wanted to buy! Looks like buyers are scarce and no one is soliciting listings anymore.
my folks built a nice place in fall river 15 years ago and spend half the year there.great place but not much work.great place to retire but as rental market nah.
DJ, couldn’t agree more! I’m in the Salem area and I’d been wondering how things were developing there. How can any right thinking person believe that renting a place for $700 a month is going to provide any kind of financial relief is beyond me. We now actively avoid Bend. Not only as a destination but even to pass through. I hate to admit it b/c I’m not a native Oregonian but this is SO typical CA! How long can your economy thrive when all that is going on is people “pimping” homes to each other?
DinOR, the economy here is in for a big surprise soon. Everyone in this area is working in construction related jobs. Last summer I needed my main plumbing line redone, my two story house painted, and my garage reroofed
( I’m afraid of heights). I called every plumber, painter and roofer in the area. Not one plumber would return my call, all the painters were booked all summer, and all the roofers were booked on new construction saying a little job like my garage was not worth their time. I spent all summer doing these things myself
( saved a fortune and didn’t break my neck, thank God). A guy in the town I live near just bought and graded 30 acres ( cost over 3 million ) and is going to put in a complete subdivision of zero lot-line homes this summer. People here are going to lose everything when this thing blows.
dj that is exactly what is happing in my town of kingman az, lots of new homes that nobody can afford with $5.15 per hr. min wage here.
SoCal housing market, from the LA Times…
Home Prices Hit New High
Southern California’s median rises to $480,000 in February, but the number of sales is down.
http://tinyurl.com/ktzd8
“One thing is clear: The time needed to sell off the current inventory is increasing, said Patrick Veling, president of Real Data Strategies in Brea.
He said it would take about 19 weeks to sell all the homes on the market in Los Angeles and Orange counties today, assuming a sales pace seasonally adjusted over the last 12 months. That’s up from 12 weeks a year earlier.
By comparison, during the depths of the last real estate downturn, in the 1990s, local inventories swelled to 19 months of supply.”
….
“Analysts were reluctant to draw too many conclusions from January’s and February’s results, saying that by the end of this month a more accurate picture should become apparent.
By then, the market will be entering the spring selling season — the strongest period in the annual housing cycle. Last year at this time, shrinking inventory and lower interest rates created a “mini-frenzy” of buying activity, economist Krueger said.
“The question now,” he said, “is what will happen this time.”"
FYI, the National Association of Home Builders’ monthly index was just released (usually comes out at 1 p.m. … don’t know why it was early). Anyway, this is as close to “real time” as you get with regards to what home builders think about their sales, buyer traffic, etc. Long story short, the index dropped another point in March from February. The reading of 55 ties two lows from mid 2002 and mid 2003. We have not had a reading LOWER than 55 going all the way back to the months just after 9/11.
I love this Zillow site. I just looked up a townhouse in Hermosa Beach that is listed for 1,475,000.00. The Zillow estimate was not too far off(about 1,370,000.00) but what was really eye opening was that its estimate value just 5 years ago was about 280,000.00. Now nothing has really changed that much in Hermosa Beach in 5 years(wages about the same, population not to much higher etc), the only difference is this mania we call a bubble. Somethings gotta give!
Wonder if it was a tear-down? Lots of that going on there. Something’s up…280k to 1.4 in 5 yrs makes no sense…
Most townhomes can only be redeveloped with permission from the HOA, and apart from window and door replacements that hardly ever involves the exterior. There is also not usually a lot of room for adding bedrooms and bathrooms, though it is possible and would pump the Zillow “zestimate” figure.
I wasn’t really referring to a large condo project; many of these “townhomes” in Hermosa/Manhattan/Redondo Beaches are freestanding on a single lot (maybe 2000 sq. ft.) so there are no HOA’s and can be razed at the owner’s discretion (with City approval, of course)
“The California speculators are all over here ( which is the middle of nowhere). They are buying one acre lots and building new 2000sf homes for $160,000 and trying to sell them for $270.000 plus. The problem is none are selling! They have been sitting vacant since last October.”
Lots of these Cali speculators did it by taking out a HELOC. So they will lose not only the spec home but their own home.
Question for the RE knowledgeable: What is life like for a flipper as April 15 nears? If you’ve got 10 houses in 5 different states, does the bookeeping not become a nightmare? What happens to the chance of an audit? With the stories of massive numbers fudging we are hearing with regards to Loan Officers and Appraisers, how much income tax fudging is going on?
I think the flippers are going to have a lot of real losses to deal with
A lot of people seem to have misconceptions about homeownership tax issues, such as thinking you can deduct your mortgage interest payments from the amount of tax you owe. I wonder if any of these folks are doing their own taxes, and doing them really wrong.
…or really fraudulently. I bet there are LOTS of cheats, who are taking a risk that they won’t get caught (the low chance of an audit) and ready to use “ignorance” as their defense if they do get caught.
Brad-I took this from a buddy’s post over at Piggington.com (it describes exactly what you’re mentioning…
Evisceration….
1) Can’t rent out that investment property to cover your costs
You learn that there is no such thing as a secondary market for a USED Hummer H2 so you can’t sell it.
2) Can’t sell because the homebuilder is offering your exact same model for 30% less (see Sacramento)
3) Can’t afford carrying costs
4) Fall behind on mortgage for 2nd or 3rd property…perhaps lose the house
5) Screw up your credit so no more REFIs, no more purchases for a LONG time
6) Your I/O negative amortizing loan resets and you start to lose your PRIMARY residence
7) Your Hummer H2 breaks down and you can’t afford to fix it.
9) Gas goes up 1-penny per gallon and pushes you completely over the cliff as you couldn’t afford any of this S*%t to begin with…
10) Finally, they come and take that McMansion off your hands (they=the bank w/his buddy the sheriff)
11) From here on out the only thing you (the former investor) will be “camping out” for is government cheese.
Sigh - tastes like Velveeta. Not too bad when you’re a kid in the late 70’s recession.
Ahh yes, the government grilled cheese sammich. The staple of diets during recessions everywhere!
I prefer Top Ramen personally.
Some of this is too funny - and so true. A few more definitions:
McMansion - a poorly built, overpriced large structure far from employment center/infrastructure which is purchased by either a speculator or a person who has bought into the mentality that its value can only go up so get as much as they can.
Joe (Jane) McDebtor - homeowner making the Extra Value mortgage payment on his/her McMansion. (I want to be potically correct).
Flopper - a flipper who has lost his/her shorts
Joe Six-pack - the average American who blindly trusts the real estate/mortgage/media and ends up on the losing end of the property deal.
Sheeple = a large aggregation of Joe Six-packs
What - in Oregon, the California floppers are going to be surprised that Joe Mechanic at the small town gas station earning $8/hr and living in a small mobile home or apartment won’t want to or be able to buy their $270K McMansion. They would rather live peacefully, do their job, and go home and relax without stressing about Extra Value mortgages.
As a former CA renter, I left due to the unaffordability factor there - came to ABQ, am purchasing ONE (uno) home in a nice area and a reasonable price. I plan to stay in that house until the time comes when the good Lord figures I am done here and ready to go back to him. I don’t intend to flip it, just LIVE it, and pay off the balance as quickly as possible. What a different idea. No LIBERATING EQUITY, to buy a Hummer, or other BS stuff. I am satisfied with paid for cars. I don’t have any big desire to purchase “stuff” - just want to be able to provide for my children and have them enjoy life (but not be spoiled brats).
Good for you , I hope your happy…..sounds like you got out of California at a good time .
Good luck! Just be wary of the potential collateral damage from flippers cashing out…
Sheeple - the masses that bought into this housing hysteria and will be getting slaughtered on the coming downturn.
ditto the great glossary - bookmarked it for future reference
I did a Zillow on the house which sold directly across the street from my parents. The kid’s father died and left him the place. He had it on the market for $2.25 mil for about 2 years and we thought he was insane. I guess he is laughing all the way to the loony bin now. WOW!!
Sale History
05/16/2005: $1,626,000
12/04/1996: $315,000
ockurt
No, its definately not a teardown. I just zillowed it because my girlfriend lives nearby and I heard what they were asking for it.
It is definately at least 20 years old. The wild thing is looking at the Zillow chart is that from 2001-2004 it just went up slightly then just took off to the upside 2 years ago, I mean like a rocket. However I definately think they are aking too much though because thier asking prices is a huge spike for the Zillow estimate of 4-6 months ago while the zip code it is in has actually gone down alittle since then. If you want to check it out, the address is 343 Manhattan Ave. in zip 90254.
I found it. That’s funny…I used to live down the street from there and I remember that place. Yeah, looks like it was built in ‘90…definitely a TH…2300 sq. ft….nice sized…looks like it was reduced recently on ziprealty (still overpriced)…can’t believe how pricey South Bay has gotten. My wife and I are looking for a house around Torrance…HB and MB too $$$
GetStucco - thanks for the nice comments. There are still more people actually coming here than there are flippers. I would like to lowball a few desperate floppers here in time. CA is now just too nutty for me.
Rainman18 - keep up the songs (parodies). It is a wonderful talent - just been laughing out loud so hard that I have a hard time containing myself. You are the MAN (gender neutral - since don’t know).
zillow.com gives my home a value of $349,473 - we purchased $299K. My guesstimate based on comps - $340K at this time. Hope we have room to grow, and then ride out any national downturn OK. And then profit from the floppers/FBers