Home Prices

Compare the average household income to home prices.  At the height of the market, the median price of a single-family home was 185% to 230% of household income; now the ratio is 153%.

Mortgage Rates

Mortgage rates are at an all-time low.  The median mortgage payment on a single-family home is currently 6.9% of household income, less than half the 14.4% average since 1966.  This creates the opportunity for long-term financial gain for buyers who lock in long-term financing at the current low rates.

Cost of Alternative Housing Choices

Until about five years ago the average mortgage payment was 150% of the average rental cost.  Now, the average mortgage payment is 78% of average rent.

Supply of New Housing

Compare home prices to the cost of building new homes.  Since 1975 U.S. residential real estate has been worth about 55% more, on average, than the cost of building it. During the housing boom home prices rose much faster than construction costs, so that by 2005 the value of homes was twice what it cost to build them.  Home building was profitable, and easy.  Since then construction material costs have risen while home values have plummeted.  Home building has ground to a halt.  Home prices will have to rise significantly before builders will be able to build again and increase the supply of new housing.  This restricted supply will put upward pressure on prices and should comfort current homeowners and buyers.

What about the “shadow inventory” of homes in or close to foreclosure? It is estimated that about two-thirds of these homes are not yet listed for sale and therefore are not in the inventory of unsold homes.  Some variation on that estimate is true.  We have consistently seen, however, that banks are placing these homes on the market as the market will support them, and are not flooding the market with a supply of distressed properties.

Demand for Housing

Normal demographic trends are building pent-up demand. The recession of 2008-2009 resulted in couples postponing marriage, families postponing children, and immigrants not coming to the U.S. due to the lack of jobs.  Despite the slow economy, however, these trends already support more home building than is occurring, and will only increase as the economy improves.

Summary

Home prices, housing demand, and home building are still low, but they all seem set to increase.  Housing inventories remain high in some areas (when “shadow inventory” is included), but are on a downward trend. And while the attitudes of both home buyers and lenders remain cautious, they should become less so soon.   Buyers and home owners should not be discouraged by the current market; it is only creating a pent-up demand for increase.  Although the U.S. housing market remains extremely depressed, current valuations and demographic dynamics make now the time to consider investing in housing.

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The 20-City Composite also decreased 1.3% this past November compared to October 2011. Portland showed a 1.6% decrease between November and October. Several cities – Atlanta, Las Vegas, Seattle and Tampa – all reached new lows in November 2011.

Portland dropped 4.8% from November 2010 to November 2011, outperforming all the other West Coast markets. Seattle dropped 6.3% and the three big California markets all dropped between 5.4% and 5.5%.

None of this is really news, as it was reported several weeks ago in local papers and in this blog. The real question remains: Have we finally hit bottom? Many experts think so. More on that next time.

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Worst of article: Gawdawful photo.

Best lines:

“There are some, indeed, round these parts who’d like the entire Pacific Northwest to break off from the rest of the US and go it alone” (some days, particularly during election season, I feel that way, too),

“Portland has the highest number of microbreweries in the world” (well, duh…).

Why do you like Portland?

The Portland median home price fell 7.9% from 2010 to 2011. Average price fell 6.7%. 22% of the homes sold were bank owned, selling at a 36% average discount from non-distressed homes. 11% were short sales, selling at a 17% average discount. Non-distressed properties held their value much better than distressed properties, and actually appreciated in a few areas. The overall year-over-year decline was smaller than previously years, which usually signals stabilizing prices.

The number of homes listed for sale in 2011 dropped 25.4% from 2010 to 34,084. That led to a steady decline in the inventory of homes available for sale. At December’s sale rate, it would take only 5.3 months to sell all the homes on the market, a level not seen since July 2007, the peak of the market. Six months inventory is generally considered a balanced market.

What does all this mean for 2012? Stayed tuned.

The Portland median sale price fell 6.7% between October 2010 and October 2011.

Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.

The Portland median sale price fell 3.8% between September 2010 and September 2011.

Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.

Many sellers are pulling their homes off the market rather than sell them at discounted prices. In addition, banks have slowed the supply of foreclosed properties since processing irregularities came to light last year. While falling inventories are typically a sign of healthy buyer activity, that isn’t the case now. The shrinking supply isn’t driving up prices because buyer demand is soft, despite attractive prices and record low interest rates. While sellers are reluctant to under price their homes, buyers are afraid to over pay. As one person quoted in the WSJ article said, “I wouldn’t describe it as a buyer’s market so much as no market at all.”

Download a PDF of the article by clicking Slim Pickings Are Latest Headache for Home Sales – WSJ

Borrowers could pull as much as $50,000 from their retirement account or one-half of the current value of their account, whichever is smaller, and avoid the typical 10% tax penalty. The cap is a lifetime cap, and does not expire on a particular date. Borrowers are eligible to make multiple withdrawals until they reach the cap. The money must be put directly toward the mortgage within 120 days of withdrawal.  Jump to article

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Other west coast cities were also higher in July than June, though none as much as Portland.

 
All markets except Detroit and Washington D.C. were below their July 2010 levels. Portland was down 8.4% from July 2010 to July 2011.

Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.

Want to just look at homes online? Try the Best Home Search Site on the Planet, no obligation.

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The August RMLS Market Action reported Thursday that Portland’s closed home sales were up 5.6% from July 2011 (1,709 to 1,805), and up 30.7% from August 2010 (1,381 to 1,805).
 

 
Portland’s home sale prices fell slightly from July 2011 to August 2011. The average sale price fell 1.2% ($275,100 to $271,800) and the median sale price fell 1.0% ($227,200 to $225,000).
 

 
Months inventory at the end of August fell to 6.2, meaning at the August rate of sales it would take a little over six months to sell all the homes then on the market. This was a decrease from July’s 7.0 months, and continues to be within the “balanced market” band of 5 to 7 months supply that we have seen since March 2011.
 

 
Looking forward to September and October closings, August 2011 pending sales increased 13.4% from July 2011 (1,928 to 2,187). New listings went down 2.1% (2,942 to 2,879). Absent a surge of new listings, September and October months inventory should reach the lowest point since before the crash, a welcome development indeed. For home sellers, the lower inventory will, hopefully, temper the seasonal drop in sale prices that occurs every winter.
 
Curious about your neighborhood? Call us at 503.222.4300, or visit our Portland Home Team Market Data Center.