Ikea, Portland’s Newest Big (Flat) Box Store
By Charles TurnerWe spend a lot of time with relocation clients. One of the most common questions is, “why live here. Why did you leave the Bay Area (almost 15 years ago)?” We can ignore the CA v. Oregon debate. This is where I live; but why? A partial list:
We can snow and water ski in the same day (not that we ever have)
Snow or ocean is about an hour and a half away (last year it snowed at the ocean).
The food scene is good (I went to Western Culinary in ’97)
The beer scene is good (International Brewfest last week, Brewfest next week, and all those local breweries)
The wine scene is good (Think pinot but we have some pretty other local stuff too)
We walked into the Pearl District and found closed of streets with a craft fair going on
When I attended my 10 year high school reunion, we owned five houses. No one living within 50 miles of my high school owned one.
People will start camping out on Monday for the grand opening of Portland’s newest big box store, Ikea! They open Wednesday; two days off work to buy furniture that comes in a flat box that could have been bought less than three hours away isn’t my cup of tea. Is this another sign that Portland is a major market? We’ve got a Crate and Barrel too. What’s next? An NBA championship?
Why do you live here?
There’s also an Ikea opening up out by the airport.
Never heard of Aikia. Is that a Japanese furniture store? Or perhaps that’s the feeling in your back after hauling all of that furniture home.
Frankly, I’m surprised you are so negative about Ingvar Kamprad Emtaryd Agunnaryd. This progressive scandinavian company has never been listed on a stock exchange and is a leader in environmental issues and worker’s rights.
Also, IKEA is a no brainer considering the cost of staging investment properties with *real* furniture. Given the dozens of puke green aprtment buildings currently being converted into luxury condos, IKEA is bound to rake in the dough in PDX!
Besides the fact that I can’t freak’n spell Ikea I don’t see the negative at all. Guess you see what you go in with. All I said was that I wasn’t going to wait in line to to buy furniture (though the chair they are giving away to the first 100 looks pretty cool).
Ikea is going to be a cash cow in Portland, no doubt about that. I’m sure I will participate but not this week.
Actually, I hear the food at the Ikea cafeteria is pretty decent and also very cheap.
But I still remember how in Fight Club when they go into the guys apartment and it’s basically an Ikea catalog… All those Ikea buyers thought they were so original.
Crate & Barrel and IKEA may be signs that PDX is a major market. Alternatively, their presence may indicate that increasingly, only the “big guys” can afford the rents here while the individually-owned stores are slowly pushed out.
My wife and I came here because we PDX as a mecca for the creative class (e.g. cheap rent). We run an international music website and radio station together and my wife has her own line of jewelry. Portland also seemed to be more of a working man’s town that resisted the homogenization we see on the rest of the coast.
However, many creatives are now leaving Portland because they can’t afford to live here (most creatives don’t make that much $). My friends who stayed in my native central Illinois all have nice affordable homes because home prices there remain aligned with income. But this is central illinois I’m talking about so take it however.
We are considering moving ourselves seeing as three times my 60K salary doesn’t buy much of anything here (three times yearly salary = optimal purchase price for a first time buyer). Also, with Portland becoming a major market, much of the uniqueness seems to be fading away. At the same time, I have a very stable job and we have a lot of friends and other roots here, so leaving isn’t something that would be easy for us to do.
Portland also seemed to be more of a working man’s town that resisted the homogenization we see on the rest of the coast.
The PDX area is now about as homogenous as they come.
We are considering moving ourselves seeing as three times my 60K salary doesn’t buy much of anything here (three times yearly salary = optimal purchase price for a first time buyer).
[mortgage_broker on]
Oh, come on PDX_Renter, you can easily afford $375K for a 2BR/1Ba ‘bungalow’ in SE. Any mortgage broker will tell you that [because they're hungry for a commission, of course]. You just need to stretch yourself. Be willing to take a risk. [mortgage_broker off]
Actually, you’re very wise to not want to go over 3X income (and only on one income as well). Lots of people will be hurting soon because they weren’t so wise.
So where do you think the ‘creatives’ will be moving to find more affordable digs? Some people think the MidWest might be a good place since thins didn’t get crazy there. I’m wondering about Canada: if you don’t have to worry about healthcare that allows you to persue a lot of creative endeavors without as much worry.
“creatives” have an interesting problem. they need an audience/opportunities, which usually = big city. but big city = not affordable these days (trade off for the amazing turnaround of urban america).
portland still is quite affordable for “creatives” which is why they are moving here in droves (and young people in general).
the market in inner portland is pretty flat right now. its probably the best time in at least a year or so to buy a house in inner portland if you are on a shoestring budget. heck there is a $209k 3br in Boise right now. it would have sold in a day back in May.
the market in inner portland is pretty flat right now. its probably the best time in at least a year or so to buy a house in inner portland if you are on a shoestring budget.
Just wait six month to a year: it’ll go from ‘pretty flat’ to trending down.
I’d guess that the $209 3br house needs a lot of work… If you’re on a shoestring budget you won’t be able to afford to pay for all the work that needs doing. That’s the dilemma: if you need a cheap place you could buy a fixer, but you can only borrow up to the price of the house, so what will you do the fixing with?
Charles: According to http://www.housingtracker.net/ inventory went up 2.4% last week to 18,671. Do you know if this is record inventory for PDX? Has inventory hit 20K before? Looks like that could happen in a month or so.
Tip,
I don’t know what the highest inventory on record is. I can see from Housingtracker that they refer to single family and condos in their stat but without knowing the specific area they are using, there is no way of comparing. When I search RMLS for active and bumpable listing in Portland, RMLS areas 141, 142, 143 and 148, I get an inventory of less than 7000…
Charles: I’m not sure what those 3 digit numbers correspond to, but I suspect the number of Housingtracker includes the ‘burbs: Beaverton, Hillsboro, Gresham, etc.
RMLS uses three digit numbers to define areas. It is a system that has been in place for as long as I have been around- it is how the Oregonian sorts its classified listings too. 141- North Portland, 142- NE, 143- SE, 148- West. 149 is outer NW Portland and Sauvie Island.
When do the ‘burbs end? Do I stop in Beaverton, Hillsboro or Forest Grove???
The codes are absolutely obscure but RMLSweb, the agent side of RMLS.com, requires us to enter the areas we are searching in. The RMLS area is the defining search criteria, it has to be included. No fair shooting the messenger
I don’t think that inventory went from 13,752 (RMLS Market Action) to 18,671 (hometracker) in six weeks. Hometracker was already reporting 16,374 May 21. They are using different areas and we don’t know what they are. Do we?
There is a new post lurking but it will take some time to flush out as the only way I can see gathering the data is reading the past RMLS Market Actions (they go back to 1992).
What matters more? The current high number of listings which would take 5.0 months to sell or Jan. 2000′s 13,466 listings which equated to 10.1 months of inventory???
Not that it is going to happen but how quickly could 5.0 months of inventory become 2.6 months again?
Not that it is going to happen but how quickly could 5.0 months of inventory become 2.6 months again?
When you factor in the Market Action’s “Affordability Index”, do you really see the supply dropping that much? A median salary cannot afford a median home even with 20% down.
When you factor in the Market Action’s “Affordability Index”, do you really see the supply dropping that much?
No. I was just countering Steve’s hint about how long it could take to get to 10 months of inventory.
If somebody has an absolute (and proof)of what the market is going to do, please share (at least privately with me).
Actually, Ikea is a “nonprofit” devoted to research into furniture. They spend about $10k a year on their mission. Otherwise, they have foundations inside foundations inside foundations making sure that the family which owns Ikea rakes in the cash while the company pays no income tax worldwide. It’s weird they have such a great rep. The Wall St. Journal did a cover story on their corporate structure and their unusually successful tax avoidance last year.
Not sure why you’re using those obscure “area” codes. The RMLS Market Action which you said you got a copy of several days ago gives the total number of active listings for Metro Portland as of June 2007 in 9th line of the report – 13,752.
I personally don’t put any stock in housingtracker.net. That said, it was pretty obvious (to me, I guess not you?) from the Market Action report what the RMLS thinks is the current inventory.
Regarding your 9:07:22 post – I’ll agree that the months of inventory matters. However, with new listings growing at 12.7% YOY and closed sales and pending sales dropping 18.5% and 10.4% respectively YOY, would you care to guess how quickly 5 months could become 10 months? Hint: the months of inventory just about doubled from 2.6 to 5 over the last 12 months, which according to appreciation numbers was a fairly healthy period.
Without looking very hard at RMLS data – 2 years. Jan 2004 to Jane 2006 to go from 6.1 months to 3.2 months – a very healthy period. Bottom line is 1 year for months inventory to double during a period that was still realtively healthy is pretty quick a could quicken.
Not that it is going to happen but how quickly could 5.0 months of inventory become 2.6 months again?
Charles, let’s be realistic. You know that’s not in the cards. Given all the FSBOs out there, I suspect we’re already at 6 months inventory right now.
Also, months of inventory is a backward looking metric. That five months is based on the sales rate and inventory in June. Given that the May-June-July period is probably the peak of selling season and given that we’re now heading into August with what is indisputably a very large inventory this suggests that months of inventory is probably well over 5 even now. Whether the number is 13K or 18K is maybe not so relevant; the relevant thing is that it’s been growing steadily since the beginning of the year.
Countrywide does 1/5 of all the mortgages in the US. Today they said that they’re not only seeing delinquencies rising in subprime, but also in prime. Not only that, but Countrywide just passed the 10,000 REO mark (they now have 10K foreclosed houses on their books).
Not to worry, though, it’s all contained…
It’ll be fun to watch the arrogance of PDX homeowners evaporate when they realize that Portland isn’t so different after all. The real estate crash has only begun and only a fool believes Portland will somehow escape unscathed.
And to Tip: 60K is a good salary, even here, as the median is 46K. You’re not going to find much in the midwest (in a neighborhood you would live in) that is cheap. Remember that places like Detroit, St. Louis, Indy, etc. have decimated urban areas of housing with prices like 30-80K which draws down the median price. If you want to live in those areas, good luck. They’re brutal, unsafe and difficult to stomach. I tried. Was like living in the movie Escape from New York (ironically, filmed in St. Louis).
Meanwhile, Portland, Seattle and the like have no horrible ghettos with blocks and blocks of boarded up homes so the prices never drop so low resulting in higher medians. Yes, you get more for your money in “flyover country” but the livable neighborhoods aren’t being given away as some here think. The cool, fun, relatively safe places are of course the most expensive.
Bottom line: Do not rely on median price figures when comparing cities.
And to Tip: 60K is a good salary, even here, as the median is 46K.
Indeed it is, but I believe it was SE Renter who was lementing the fact that he couldn’t find a decent place that meets the 3X annual salary requirement (that would be a place for $180K).
As for moving to the MidWest: I’m not planning to. Some of the younger folks may have to if prices don’t correct here soon… But I tend to agree with you that prices are just now beginning that correction process. A process that takes several years to play out. It could be that in 5 years Portland will once again be an affordable to buy if you have a 60K income. We can only hope.
Why will it take several years for a correction to play out? We’ve never seen such a meteoric rise in values on a national level, and I think we’ll all be shocked by the never before seen meteoric fall. Bottom line is that if banks start demanding sizeable down payments (to protect their assets from falling home prices), first time buyers will disappear along with everyone that lives in an ATM house looking to continue upgrading and speculating. What buyer’s are left? Homeowners that think they have enough equity to move, but can’t find a buyer for their own house. Suddenly you can’t find a buyer at any price.
MarketTimer: That would be a market freeze. Eventually prices would fall…
But I still think it will be a very slow process as it has been historically. While prices did rise very rapidly, still, it happened over about a five year period. Housing prices have historically always been sticky on the way down. Sellers don’t want to admit that the market has changed and so they tend to keep the prices higher than they should be for longer than they should.
Houses aren’t nearly as liquid as stocks, for example, so that’s another reason the decline will likely be comparatively slow. With a stock market crash you can point to a particular day or maybe a week or month where the market tanked. With housing it’s going to be measured in years. Though, I think we reached the tipping point in the credit market over the last couple of weeks. Events there will directly lead to the oxygen removal from this market – as in how fires will extinguish when the oxygen is removed from an area.
…on the otherhand, I think there were some charts posted here several months ago from the early 80′s showing that prices in Oregon fell 20% in a single quarter in 1981. That seems like a very unusual case, though, since Oregon’s economy at the time was almost completely dependent on timber and when the housing market goes down nationwide there is a much lower demand for timber. That was what you’d call “the double whammy”: prices fell, demand fell and timber production went south meaning that lots of people here were out of work at the time. As I recall, the unemployment rate for Oregon overall at the time was approaching 10%. In timber producing areas outside of Portland that was probably closer to a 20% unemployment rate. While I think things look pretty bleak for housing right now, I don’t believe we’ll have anything approaching what happended in the early 80′s in Oregon.
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Actually, my better half and I agree that 2.5x income is more realistic. We don’t want to worry about how much we spend when eating out. Buying a house is like buying on margin… hugely risky if the true value of your investment decreases.
Actually, if big companies didn’t farm out the work to India, Pakistan and Mexico, and if the CEOs didn’t take home millions of dollars in bogus salaries, many more people could afford homes.
You can thank these mainly Republican business “owners” for keeping many Americans on the poor side. No wonder everyone shops the Chinese imports at Walmart. And because of that, the Walton family stays rich. And the American goods makers lose their businesses and the people who work for them lose their jobs. And then no one can afford a decent house.
but I believe it was SE Renter who was lamenting the fact that he couldn’t find a decent place that meets the 3X annual salary requirement
It was actually PDX Renter (me) who was lamenting not being able to find a decent place.
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