Skip the usual disclaimers; here is what I think:

1. The Portland housing market has stabilized, as evidenced by the leveling of sale prices and the generally balanced inventory.

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2. That stability is fragile. Several threats remain:

• Weak Demand:

Continued high unemployment means fewer qualified buyers, fear of buying amongst those who are qualified, and a general lack of urgency by the buying public. There are a lot of potential buyers waiting for the day they are certain values won’t drop further.

• Mortgage Availability:

The Federal government is scheduled to stop its bailout buying of mortgage-backed securities after March 2010. Without a fluid secondary market, loan originators won’t be able to cash out new loans, and will make fewer new loans at higher cost to borrowers. I have a strong hunch that the Feds will continue this intervention if the secondary market hasn’t started to heal itself by then.

• Interest Rates:

Some economists think 30 year fixed rates will rise close to 7% this year. They’ve said that many times over the past few years. This time I think they’ll be close to right. Perversely, the threat of rising rates will stimulate buying in the short-term, as it has done many times before.

• Employment-Related Distressed Property Sellers:

No job, no money to pay the bank. Have job, keep the home. ‘Nuf said.

• “Strategic” Foreclosures:

Reports are circulating of people who, though able to pay their mortgage, choose to abandon their homes on the theory that they’ll recover faster financially without the house than waiting for the house to recover its value. Credible estimates exist that the likelihood of homeowners doing this increases dramatically when their homes’ value dips below 75% of the secured indebtedness. My hunch is that we’ll hear a lot of these stories from other parts of the country, particularly the housing bubble states, but that the Portland real estate market won’t be affected much further.

• The “Shadow Inventory”:

No this is not a Marvel comic book character. Anecdotal reports are increasing that banks have a huge supply of distressed homes, either about to be taken back, taken back, or foreclosed upon, that will be dropped on the market any day, and that such a flood will sink property values further. No doubt these homes exist, but the number doesn’t become larger by repetition. Banks frequently delay starting the foreclosure process, call it “strategic non-foreclosure,” for a number of reasons (a topic for another post!). Nobody has been able to give a good estimate of this shadow inventory’s size, or how it will be managed, so its hard to know if it will matter in Portland or not. Even if the number is as large as some speculate, one would think the banks will trickle the properties onto the market over time. Imagine Bill Gates selling all his shares in Microsoft: it would be done slowly. Nonetheless, bank-owned or controlled properties will be added to the supply of active listings for a long time to come, thereby putting some downward pressure on prices. It’s just impossible to tell how much.

• Expiration of the First-Time Homebuyer Tax Credit:

I mentioned earlier that I did not think the credit was affecting the Portland housing market as much as the media has reported, so I don’t think its expiration will matter much, either. That said, the credit is a real bonus to an eligible buyer, so best get on the stick if you hope to take advantage of it.  See our summary of the First-Time Homebuyer Tax Credit to learn a few twists on utilizing the credit.

3. So what will the Portland housing market do in 2010?

• Unemployment will fall slowly but steadily throughout the year.

• Interest rates will remain low for most of the year, but finally start creeping up as the economic recovery gains traction and the markets respond.

• Portland median home prices will remain flat for several months, with a slight upswing later in the year. Monthly fluctuations will occur, but the overall trend will be fairly stable.

• Several Portland sub-markets that have been excessively discounted (Forest Heights and parts of West Portland, for instance) will rebound towards the overall Metro Portland trends, giving the appearance of a spike in activity and prices. Of course, if your home is one that sells quickly for more than you expected, this correction will be more than just an appearance!

• Several sub-markets (Lake Oswego for instance) that have resisted price adjustments will show either price drops or excessive standing inventory (again).

• The Oregonian will report a lot of meaningless statistics, and will announce the housing recovery three months late.

• Many buyers will look back at the bottom of the market and wish they had bought earlier in the year.

• Just my opinions. Maybe I’ll be right!

4. Where are the opportunities in 2010?

• Tune in next week,
• Visit the Portland Home Team’s Market Data Center for current market data, or
• Call or email us to discuss any other real estate concern.

Portland Housing Market: 2009 Review, 2010 Forecast

• Monday – 2009 Portland Home Sale Prices: RMLS releases annualized 2009 data for Portland metro and sub-area markets.
• Tuesday – 2009 Portland Home Sale Totals: What type and size homes have suffered the most?
• Wednesday – Active Listing Inventory: Is it true that Portland is flooded with “For Sale” signs?
• Thursday – 2010 Forecast: What we think it all means for the market value of your current or future home.
• Next Week – Opportunities in 2010: There are unbelievable bargains out there, but they’re not obvious.

Short answer: No.

Long answer: Not now, based on recent months’ sales.

The best measure of market balance is “months’ inventory,” which Realtors measure by dividing the number of active listings on the market into the number of closed sales in any given month, i.e., how long it would take to deplete the inventory at the current month’s rate of sales. A six month supply is now considered neutral (it used to be eight), less being inflationary and more being deflationary, or at least stagnant.

Portland had a 7.7 month supply of listed homes at the end of December 2009, and was below eight months’ supply for the entire second half of 2009. Not bad for a city that started the year at 19.2 months of inventory.

You can almost read a seven year history of the Portland housing market in the table and chart below. West Portland is also included.

The monthly averages in the last column highlight seasonal fluctuations, and the yearly averages in the last row highlight long term trends.

The following chart displays the same information in a different format:

How are different areas of Portland holding up?

The following table sorts the Portland sub-markets from lowest to highest in months of inventory based on December’s closed sales. Note that some of the recently troubled sub-markets, such as the Milwaukie/Clackamas area, have the lowest inventories. After severe price drops, those markets are stabilizing and selling again.

What does this mean for 2010?

• Tune in tomorrow,
• Visit the Portland Home Team’s Market Data Center for other current measures, or
• Call or email us for up-to-date information about your home.

Portland Housing Market: 2009 Review, 2010 Forecast

• Monday – 2009 Portland Home Sale Prices: RMLS releases annualized 2009 data for Portland metro and sub-area markets.
• Tuesday – 2009 Portland Home Sale Totals: What type and size homes have suffered the most?
• Wednesday – Active Listing Inventory: Is it true that Portland is flooded with “For Sale” signs?
• Thursday – 2010 Forecast: What we think it all means for the market value of your current or future home.
• Next Week – Opportunities in 2010: There are unbelievable bargains out there, but they’re not obvious.

The Regional Multiple Listing Service reported that the number of closed sales in 2009 was down 0.9% from 2008 (18,955 vs. 19,132). That sounds okay.

Compared to the previous six years, however, Portland home sales were down a lot more than that. Total closed sales in 2009 were 63% of the average annual number of closed sales in the years 2003 through 2008. To avoid an overwhelming display of numbers, you can sense this phenomenon in the bar chart below (contact me if you want the raw data).

It’s also noteworthy that the mix of sold homes stayed fairly consistent through the years. The two pie charts below are different. The first illustrates the percentage breakdown of total sales in Portland by number of bedrooms from 2003 through 2008; the second 2009 only. No house type varied by more than one percent in 2009 from the average of the previous six years.

This result is counter-intuitive to me, and certainly contrary to the current conventional wisdom. This nearly constant mix of sold homes in 2009 happened despite: 1) the huge drop in total sales, 2) the difficulty in getting jumbo loans since late-2008 (generally thought to have slowed large home sales), and 3) the effect of the first-time home buyer tax credit (generally thought to have stimulated small home sales).

Why?

I don’t know. Here is my knee-jerk hunch, to be refined after much more mulling: People buying a home need (or at least want) a certain range of space and rooms, sometimes less, often more. Two people don’t usually buy four-plus bedroom homes; young families don’t usually buy two bedroom homes. Both will buy the size they need at a price they can pay. So assuming that the need for various size homes is relatively constant, it’s reasonable that the mix of homes purchased could also be constant.

That leaves the main variable on the demand side to be the price buyers can afford. That price is influenced primarily by employment and interest rates, and secondarily by wealth, in the form of down payment funds, and mortgage availability. Yesterday I showed that Portland home prices had fallen fairly evenly across these same home size categories. Perhaps the impact of these factors is more evenly distributed across buyer profiles than we thought.

I have a hunch that a deeper look into the 2009 home sales in each size category will reveal some good clues. More later.

What about the supply side? I’ll post on that tomorrow.

Visit the Portland Home Team’s Market Data Center for other current measures, or call or email us for up-to-date information about your home.

Portland Housing Market: 2009 Review, 2010 Forecast

• Monday – 2009 Portland Home Sale Prices: RMLS releases annualized 2009 data for Portland metro and sub-area markets.
• Tuesday – 2009 Portland Home Sale Totals: What type and size homes have suffered the most?
• Wednesday – Active Listing Inventory: Is it true that Portland is flooded with “For Sale” signs?
• Thursday – 2010 Forecast: What we think it all means for the market value of your current or future home.
• Next Week – Opportunities in 2010: There are unbelievable bargains out there, but they’re not obvious.

RMLS recently updated the annual market data for Portland metro and sub-area housing markets. By the simplest measure, Portland home values fell 11% in 2009. The 2008 median sale price was $278,000; 2009 was $247,000. West Portland fell slightly less, about 10%. The 2008 West Portland median sale price was $389,000; 2009 was $349,000.

For 2009 Metro Portland is also 14.8% below the 2007 median sale price of $289,900, and 19.4% below the peak month of 2007.  See S&P/Case-Shiller releases November 2009 Housing Indices to find out how Portland fared amongst the twenty largest U.S. cities.

Price adjustments occurred pretty evenly across home sizes, at least when measured by the number of bedrooms.

Those nice smooth lines, however, mask a lot of month to month variation. For instance, the same data for the West Portland sub-market, graphed in detail at a monthly level, illustrates the wild swings that occur within any twelve month period.

Despite broad statistical measures, values have not changed consistently throughout Portland. Visit the Portland Home Team’s Market Data Center for other current measures, or call or email us for up-to-date information about your home.

Portland Housing Market: 2009 Review, 2010 Forecast

• Monday – 2009 Portland Home Sale Prices: RMLS releases annualized 2009 data for Portland metro and sub-area markets.
• Tuesday – 2009 Portland Home Sale Totals: What type and size homes have suffered the most?
• Wednesday – Active Listing Inventory: Is it true that Portland is flooded with “For Sale” signs?
• Thursday – 2010 Forecast: What we think it all means for the market value of your current or future home.
• Next Week – Opportunities in 2010: There are unbelievable bargains out there, but they’re not obvious.

This morning Standard & Poor’s/Case-Shiller released its November 2009 housing indices for the ten and twenty largest U.S. metropolitan areas. The twenty U.S. city index fell 0.2% from October 2009 and 5.4% from November 2008. Portland rose 0.3% over October 2009 and fell 7.5% from November 2008. Four other markets, all western U.S. cities, (Los Angeles, Phoenix, San Diego and San Francisco) rose in November over October and have seen at least six months of price increases. Portland is also up 2.4% in the seven months since its low point in April 2009.

Since the 2006 peak, the 10-city composite is down 30.0% and the 20-city composite is off 29.2%. The Portland market remains 19.4% below its July 2007 peak.

I like referring to Case-Shiller because 1) it uses a three month rolling average (smoothing out single month outliers), and 2) it measures same home resales (thereby attempting to address varying mixes of sold homes). Its methodology is not perfect, and the information is delayed two months, but its worth a look.

S&P/Case-Shiller released their September 2009 Home Price Indices this morning. The twenty largest U.S. cities saw home sale prices increase 0.3% in September from August 2009. Portland saw a 0.5% decline. Both continue the stabilizing pattern we have seen for most of 2009.

Case-Shiller Composite Index September 2009

West coast cities again showed more rebound than the nation as a whole, but also showed another loss. San Francisco saw a 1.3% month-over-month gain, while Seattle saw a 0.4% fall.

Case-Shiller West Coast City Comparison September 2009

Visit the Portland Home Team’s Market Data Center for other current measures, or call or email us for up-to-date information about your home.

October 2009 months inventory, the number of months it would take to sell all active listings at the current month’s rate of sales, fell to its lowest level since August 2007, the peak of the Portland real estate market. 2,009 home sales closed in October 2009 (up 37% from October 2008). At that rate, October’s 13,101 active listings (a 16% decrease from 16,257 in October 2008) would take 6.5 months to sell. Six to eight months inventory is generally considered balanced.

The Portland metro area median sales price has settled between $240,000 and $250,000 for eight straight months, a range roughly 11% lower than this time last year. The RMLS Market Action Report for October 2009, the source of this data, was released this afternoon.

Balanced inventory and steady prices are two strong indicators of a stabilizing market, and at another time would be cause for celebration. But the general economic recovery is young and fragile, and the real estate market will lag in its recovery. The biggest risk facing the Portland housing market: a “shadow inventory” of potential foreclosures related to job losses. More on that later.

The first graph shows the months inventory history for Metro Portland and West Portland. The second graph shows the median sales price history. More data to answer the question “How is the market doing?” is available at our Portland Home Team Market Data Center, or call or email us for up-to-date information about your home.

“Portland is the center of the craft distilling revolution, just as we were the center of the craft brewing revolution,” so quotes Willamette Week Online in its 10/21/2009 article “Over A Barrel.” Of the 200 or so craft distilleries currently operating in the U.S., 18 are located in Oregon, according to the American Distilling Institute. Read about it here. I personally think the Clear Creek Distillery’s McCarthy Single Malt Whiskey is fantastic! Just don’t call it Scotch.

Monday I posted about Portland property tax bills increasing due to constitutionally prescribed increases in assessed values and voter-approved levies and bond measures. The question remains “When is it a good idea to appeal my property taxes?”

First, the Board of Property Tax Appeals only considers assessed valuations.

• It can not determine the amount of tax to be assessed, nor can it consider financial hardship as a basis for changing an assessment.
• Appeals will only be heard for current year values, which is why the only way to affect the Maximum Assessed Value (MAV) on improvements is to appeal the Real Market Value (RMV) of those improvements in the year assessed.
  • The Maximum Assessed Value for improvements is derived by formula, which is discussed more completely at our Portland Home Team web site.
  • It makes sense to appeal an over-estimated Real Market Value for last year’s improvements because it affects both the property RMV and the MAV for improvements.
  • You cannot appeal the MAV later.
• Appeals must be filed between the time property tax bills are mailed and December 31st. BOPTA forms and instructions are available from the Oregon Department of Revenue Property Tax Division.
• If you miss the filing deadline or seek to appeal a prior year’s value, you may still be able to file an appeal with the Magistrate Division of the Oregon Tax Court. More information is available at the Oregon Tax Court’s web site.

So who should appeal their Oregon property valuation?

• You think the real market value of your Oregon property on January 1, 2009 was less than the assessed value (which is usually the MAV). A bargain purchase, such as from a relative or a distressed owner, will be valued at its fair market value, not necessarily what you paid for it.
• You disagree with the county’s valuation of new construction, remodeling, or other exceptions. Since these are not usually identified on the property tax statement, you will need to contact the county assessor to determine the value placed on any improvements.
• You think the Assessor’s Office made a calculation error in setting the Assessed Value.

Call us with your questions!

If your home or recent improvements are assessed for more than what you think they were worth on January 1, 2009, consider appealing your valuation. Call or email us any time if you think we can help.

Nationally, the Twenty City Index showed a 1.2% gain in August over July and a 4.9% increase over the low point in April, 2009, with each month showing a slight increase over the previous month. Portland home prices have also seen four months of modest gains, with the August index showing a 0.3% monthly jump and a cumulative 2.5% gain over April.

Several west coast cities are showing strong rebounds. San Francisco, in particular, increased 2.8% from July to August, and has seen a cumulative 12.5% bounce from it’s low in March this year.

S&P/Case-Shiller released their August 2009 Home Price Indices this morning. Visit the Portland Home Team’s Market Data Center for other current measures, or call or email us for up-to-date information about your home.