S&P/Case-Shiller released its April 2010 home price indices Tuesday. The Portland market recovered 1.84% from March, which was also the lowest point of the recession. The 20 City Index rose 0.84% that month and 3.84% from the national low in April 2009.

Overall, Portland is off 21.6% from its high in July 2007, and the 20 City Index is off 30.0% from the high in the summer of 2006. It took 33 months for the national market (July 2006 to April 2009) to trough before beginning a slow steady recovery. Those who argue that Portland has further to fall because it was late to the bubble party ought to consider that 32 months elapsed between the high in July 2007 and the low in March 2010, virtually replicating the national pattern to date.

How has Portland fared with respect to other west coast cities? San Francisco has recovered 18.7% from its low in March 2009, so the opportunity to move to the Bay Area cheaply has passed. San Diego has recovered 11.7%, Los Angeles 7.9%, and Seattle 1.1% from their lows.

The Case-Shiller Index is, of course, just one indicator. Visit the Portland Home Team Market Data Center for more information.

I will summarize the first half of 2010 as soon as the data is available. Early hints are that it’s mixed, but promising. What do you think the Portland real estate market will do?

The extension helps only those that entered into binding contracts by April 30 by giving them until September 30 to complete the purchase. Under current law, buyers had to close by June 30 to be eligible for the tax credit.

The National Association of Realtors estimates that the extra time will help about 180,000 qualifying buyers (plus the sellers depending on those buyers) who would not have met the Wednesday deadline, largely due to factors beyond their control. Mortgage lenders have been backlogged by the volume of buyers trying to close their purchases by June 30.

Independence Day at Fort Vancouver

• Fort Vancouver National Historic Site, 612 E. Reserve St, Vancouver, WA (Mill Plain exit from I-5)
• July 4th, 2010, 10:05 pm
• The park opens at 8:00 am. Four stages will host entertainers.
• Once the largest display west of the Mississippi, the fireworks display at Fort Vancouver is back after missing 2009 for lack of funding. Fireworks will be launched from within the park, not from a barge in the Columbia River, so viewing is best inside the park.
• General Admission is $7 at the gate, $5 in advance. Prime Viewing Area Seating available for $50 ($25 if you’re under 21).

Waterfront Blues Festival

• Tom McCall Waterfront Park, Portland
• July 4th, 2010, 10:00 pm
• The 24th year of the Blues Festival runs Friday, July 2nd through Monday, July 5th. Check out this year’s incredible lineup.
• Admission: See web site for pass information. Fireworks can be seen from many viewpoints free of charge.

Oaks Park 4th of July Spectacular

• 7805 SE Oaks Way, Portland, OR 97202
• July 4th, 2010, 9:55 pm
• Gates open 10:00 am, rides start at noon. The park is open until midnight for rides and entertainment.
• All picnic spaces are first come first serve.
• Gate fees are $5 for 16 and over, $2 for 15 and younger, and $3 for seniors 62 and up.

Blue Lake Park – Fourth of July Fireworks at Blue Lake

• 20500 NE Marine Drive, Portland (Exit 14 from I-84)
• July 4th, 2010, 10:00 pm
• What: The park is opens at 8:00 am.  Live music begins at 3:30: The Stingrays from 3:30 to 5:30 pm, Aguamiel from 6:00 to 7:30 pm, Linda Hornbuckle from 8:00 to 10:00 pm.
• Admission: $10 per vehicle, $15 for large vans

The kids think we put on a pretty good show in our own neighborhood, so we’ll probably miss the big shows. Tell us how they are.

On a more optimistic note, west coast cities continue to outperform the nation as a whole. Los Angeles, San Diego, and San Francisco have recovered 7.2%, 10.9%, and 16.2%, respectively, from recent lows. San Diego, in particular, has seen increasing home prices for eleven consecutive months.

Portland, on the other hand, reached its lowest index point since April 2005, was 2.8% below March 2009 and 23.0% below the high point in July 2007. Seattle’s recent experience mirrors Portland’s.

What do you think will happen to the Portland numbers next month?

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.

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.

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.

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.

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.

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.