The seasonally adjusted index is actually down a point from May.  Case Shiller reports come out the last Tuesday of the month reporting two months prior.

Portland Case Shiller June 2011 | Presented by the Turner Realtors Team

Now for the gut check.  Two months of increases does not make for a recovery.  We can see that five of six Aprils and Mays  in 2008, 2009 and 2010 were also increases which were followed by declines through the fall and winter months.  Last year the market managed three months of consecutive gains before rattling off nine straight losses.  During the real estate boom the Index increased 32 consecutive months between February 2004 and September 2006.

Today’s index mostly closely matches November 2004.  The Case Shiller report for “Portland” is the seven county MSA.  It runs from Yamhill County to the south to Skamania County in Washington.

My crystal ball for the short term is cautiously optimistic.  That’s working under the assumption that our government figures out their budget issues and financial markets remain stable.  Jobs, which are tied to any real estate recovery have remained stable but lower than we need.

When I was named to the Portland Business Journal’s 2011 Forty Under 40 I stated that one of the biggest challenges in our industry is “keeping a positive but realistic attitude in the face of doom and gloom media coverage.”  Don Henly reminds us to “kick then when they’re up and kick them when their down.  We love dirty laundry” and it’s no less true when discussing the Portland real estate market.  Real estate market education is more important than ever.  “Stick a sign in the yard and it will sell” worked for a number of years in an up market.  In a decline market education became key.  People need to understand how the market has changed and how it effects their situation.  Some of our listing presentations end with a recommendation to rent the property.  Some situations don’t allow for that.  Buyers have more buying power than they have had in close to a decade.  Finding the best balance for a long term situation is a team effort of both Realtor and seller or Realtor and buyer.

When we discuss “Portland” in terms of real estate there needs to be some definition of what Portland is.  For Case Shiller, it is a 140 miles from the tip of Skamania County to the bottom of Yamhill County and everything in between.  For RMLS, it is a slightly smaller five country area.  The City of Portland is just a fraction of the size of either reported area.  The methodology of the reports hasn’t changed so the comparisons from then and now are accurate but the outlying areas have been hit harder in the decline than the closer in area.  Both Realtors and appraisers start their value estimations looking at a neighborhood micro level not a metro macro level.

I watch a lot of the local real estate social media chatter and after months and months of no mention of multiple offer situations I’m starting to see more and more of them.  This isn’t a sign that the market is picking up and taking off  (well it could be) but that homes are coming on the market with more accurate pricing and perhaps even underestimated pricing.  It’s better to be slightly on the low side now than stuck on the high side where price reductions are required to catch the market.   The balance of accurate pricing is a challenge because no one wants to leave money on the table so pricing strategy isn’t black and white- you can’t create a bidding war/multiple offer situation if there is only one potential buyer interested.

Case Shiller’s monthly real estate report was released this morning.  Portland lost a little more ground in February (Case Shiller reports with a sixty day lag and “Portland” is the seven county MSA).  The current Portland index of 133.66 is nearly identical to October 2004′s 133.6.  Portland peaked in July 2007 at 186.51.  At that the same time Seattle peaked  at 192.92 and has now dropped just below Portland levels to 132.85.  Both of the national composites are above both Portland and Seattle.  Both cities were slightly above the Composite 20 for a few months in the spring of last year.  Both Composite indexes are at their summer of 2003 levels.  Portland has lost 7% since this time last year.  Of the 20 cities tracked, only Washington DC is in positive territory since January 2010.

The complete Case Shiller Press Release for February 2011 has a broader look at the national market and a really good description at the end of what the Index is and isn’t.

The graph below shows that today’s index is roughly the same as March 2005.

The 139.92 is actually an average of the three price tiers in Portland.  For November:

• Low (under $207,443): 144.00
• Middle ($207443 – $300,273): 141.37
• Upper (over $300,273): 137.04

The low tier peaked at 199.87, middle at 186.71 and the high at 180.83- all around July 2007.

The high tier was nearly 10% below the low tier at the peak and is now 5% below.  The middle tier has almost mirrored the average since the Index was reset to 100 in 2000.

While the composite housing prices are still above their spring 2009 lows, six markets – Atlanta, Charlotte, Miami, Portland (OR), Seattle and Tampa – hit their lowest levels since home prices started to fall in 2006 and 2007, meaning that average home prices in those markets have fallen beyond the recent lows seen in most other markets in the spring of 2009.

Whereas Portland held out in the top three as the national market started to dive (with Seattle and Charlotte).  Our city has fallen into the bottom tier with this month’s report.  Today’s pricing is roughly the same as April 2005 for the Portland MSA which is the seven county area used to calculate the Case Shiller Index.  David Blitzer doesn’t mince words:

“The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October’s report. Home prices across the country continue to fall.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The trends we have seen over the past few months have not changed. The tax incentives are over and the national economy remained lackluster in October, the month covered by these data. Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism. On a year-over-year basis, sales are down more than 25% and the months’ supply of unsold homes is about 50% above where it was during the same months of last year [Portland's inventory was 10.7 in October compared to 6.5 months in October 2009]. Housing starts are still hovering near 30-year lows. While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and sub-prime markets.

What it means for buyers: you have to weigh where the bottom is for the market and interest rates.

As a seller: you have to pay attention to the market feedback.  Doing nothing is the worst possible scenario if your feedback is that the property is over-priced.  A house that was over-priced yesterday will be more over-priced tomorrow.  You have to get in front of the market price or you will never catch it.

The market determines price.  Not you, me, or even the appraiser.  It is the price a capable buyer is willing to pay and a seller is willing to sell for.

The Case Shiller Index has a two month lag time and uses the seven county Portland MSA area.

Some subscribe to the theory that Portland is a year late to the party.  If Portland regresses another year’s worth, the Index would be 126.56.  I don’t personally subscribe to that as the rapid decline has leveled off but there is reason for concern.  I think there may be some up and downs but I don’t see a double digit drop from here.  If we’re a year late to the party we should see a small increase in the next 12 months according to the Composites.

It highlights the importance of accurately pricing a listing.  A listing today is potentially more overpriced tomorrow. In an appreciating market, the property value eventually catches the overpriced listing.  In a declining market the problem is exasperated. Hypothetically, a home that was listed for $500,000 in September 2009 but would have been accurately priced at $475,000 is accurately priced at $462,175 today with no other factors taken into consideration.

Buyers are potentially looking at close to the bottom of the market but we can’t judge that until time passes and we are looking at now as the past.  Portland lost 3.6% in the previous 12 months but lost 11.7% in the 12 months preceding that so the decline has slowed and even increased some months during the year.

It’s clear that “Now is a great time to buy” for a lot of people. The the ability to buy a home at July 2005 prices with a mortgage two full interest points lower than July 2005 has to be appealing.  Of course, not everyone can buy under tighter lending requirements and others may feel that general economic concerns trump reasons to buy.

There are lots of “underwater” owners who purchased in the last few years and we’ve been on numerous listing appointments recently where our recommendation has been to stay in the home or rent it out for the time being.  We’d rather have a listing in the future that will produce the desired results than a listing now that won’t perform to the seller’s needs.  Not everyone can hang on and we do have short sale listings as well and have had a couple foreclosed before a short sale could be approved.  The sooner you address a short sale situation the better.

Some sellers that are selling and moving up in the market have come to realize that they are selling at a discount but also buying a more expensive home at a discount and almost certainly at a better rate.

The punch line?  Real estate is individual.  Use us and other trusted advisers to determine what may be the best course of action for your situation.