Feb
03
2007
Portland Real Estate Market Warming?
By Charles TurnerDuring the week, a client sent over 14 listings that they were interested in seeing. When I pulled them up this morning, of the 14, only six are still active listings. One is bumpable, one is canceled and the other five are pending sales. The last three offers that we have written for clients have all been against competing offers (two were accepted). This is a narrow slice of the overall market but this was not what we were seeing one, two or three months ago.Portland Real Estate Blog
First off, what part of town were these in? Some parts of town have remained fairly warm. It’s tough to extrapolate much from this anecdotal evidence.
Also, I think we have to be realistic about the consequences of the implosion among the subprime mortgage lenders. With 20 subprime lenders going out of business in the last 2 months there will be consequences. Given that about 25% of mortgages in the last two years were subprime and given that lenders are tightening up in the wake of the high default rates these mortgages have had lately, we’ll likely see about 20% of potential buyers removed from the market over the next few months. There were several articles in the Wall St. Journal that covered this last week as well as an article in BusinessWeek:
http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070206_488329.htm?chan=top%20news_top%20news%20index_top%20story
Then there’s all the ARMs that are resetting upward this year – $1.2Trillion worth (why anyone would get an ARM back in 2004 when interest rates were quite low is beyond me). With the tightening lending standards some folks arene’t able to refi out of their ARMs and that’s leading to a high foreclosure rate in other parts of the country. I’m not sure it’s hitting here yet, but we can’t rule it out.
As someone who makes about $88K/year, I feel that I’m priced out of the Portland real estate market. I would think that $88K/year is a pretty good salary here – probably well above average for Portland which I think is in the $60K range. Of course, if I were to go to a mortgage broker they would tell me that I could easily afford a $330K home – of course they would use all sorts of exotic mortgage products (ARMS, interst-only, and other new variations) to get me there. But I don’t feel at all comfortable with any of those options. I’d prefer to put 20% down (that’s $60K for a $300K home! not a trivial amount to come up with) and get a 30 year fixed mortgage. The problem seems to be that home prices have been bid up because of all these newer exotic mortgage products which are now blowing up on a lot of borrowers who bought in recent years. Fortunately, now that sanity is returning to the market (people were thinking in 2005 that they’d lose out by not buying immediately, now people are starting to realize that they could get better deals by waiting) I think I’ll have time to save up that 20% downpayment. It might take a year (I’m about 1/2 way there), but that should be just fine given the current climate.
Anyway, I suspect this isn’t a popular sentiment among real estate agents. At this point, however, you’d think that agents would welcome a cooling off period so that wages could catch up with prices and more potential buyers could acutally afford to buy. As it is now, I think too many people are priced out of the market.