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Portland Real Estate Predictions

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This poll ran back in May. In just over a month, RMLS will officially release the December Market Action which will answer the question. May’s results show that there was no clear consensus at the time. Through October’s Market Action median price was up from $270,000 to $287,000.

New poll will run until the end of the year. I was in the 5-10% category in May (expecting closer to 5%). I’m going move down into the “remain about the same” choice but think it will be a positive number.

31 Comments on “Portland Real Estate Predictions

  1. Lots of big fish!!!

    While asking prices continue to erode and while sweetners are being added to the deals, median prices are up. Sounds like, using your terms, “lots of big fish.”

    We must guess about two factors: the direction of the asking prices, and any shift in distribution of home sales. The median asking price will be down, yet the subprime meltdown has restricted buyers at the lower end, so the more expensive homes are selling better now. The more expensive homes are also declining in asking price, but the mix of sales is different.

    So while in general each individual property is going down in value, I must ask what is the net of the two factors, or how many big fish are being sold in this down market. Given that the market is declining, but the sales are now weighted toward higher priced homes, I wonder if the two will balance each other out to near zero, as you suggest.

    What is clear, however, is that asking prices will be down five percent or more.

    By the way, it’s a little depressing to drive through some of the neighborhoods with lower property values–so many for sale signs. I am sure there is a warehouse full of sold signs, as those seem to be a rare sight out on the street.

  2. NoPo will be hard hit. June ’08 will be a good time to buy in Kenton (neighborhood of Paul Bunyan, just west of I-5 and north of Lombard). They are getting a new library, new retail/condo buildings going in, and the downtown is getting a new streetscape. Wait for the big housing market crash sound and then swoop down.

  3. Tiffany-

    If everyone knew that June ’08 was a good time to buy, then that would be priced into the market. In other words, how do you know that the area will hit a local minimum price in June ’08? In fact, if I thought there were going to be a big “swoop down” in June ’08, then I would buy in May, but then so would others, so with this knowledge I might have to buy in April, and so on and so forth.

    Also one cannot escape the Simple Random Walk (a.k.a. Gambler’s Ruin).

    Random Walk information:
    http://mathworld.wolfram.com/RandomWalk1-Dimensional.html

    The Simple Random Walk has the property of being a Markov Sequence:
    http://mathworld.wolfram.com/MarkovChain.html

  4. Long term, the predictions are somewhat more dire. See:

    http://tinyurl.com/269wj9

    Excerpt:

    The net addition of three metropolitan areas to the list of extremely overvalued markets includes five new listings and two areas that have been dropped. New to the list are Fort Walton Beach, Fla.; Portland and Eugene, Ore.; Edison, N.J. and Bethesda, Md.

  5. PDXLover-

    It is my opinion that the market has entered a down trend that will last three to five years, as many of the deals include interest rate adjustments. These adjustments are going to take place over time, as they all don’t come due at that same point in time. I generally don’t make predictions that are more than five years out, as the level of uncertainty is just too great.

    Also if we enter a period of inflation, then hard assets, including real estate, should go up. While inflation isn’t that much of a concern today, conditions could change.

    The basic idea of waiting for a big reduction in price to buy has cost many fortunes. It’s like the price of the asset is supposed to have a memory and jump right back up–many times it drops down further.

    I am not sure where Tiffany’s theory came from, but it was not from me. Maybe she will elaborate further.

  6. Say “bye bye” to all those cute DIY shops and restaurants. Its called getting a JOB. Will come as a shock to the “creative class”.

    Se_renter: didn’t the get a job by making their own job? I’ve got a lot of respect for people who are willing to give up the security of a “job” to go out and start their own business. “getting a job” can include working for yourself.

  7. Altos reports 87 DOM for PDX for Nov.
    Oct was 67.

    I agree that PDX will see declining prices for years.

    I think that NOPO, in particular, will be gutted. Newly gentifried areas never fare well inprolonged down-turns.

    Say “bye bye” to all those cute DIY shops and restaurants. Its called getting a JOB. Will come as a shock to the “creative class”.

  8. Ooops… didn’t the get a job by making their own job?

    Should be:
    didn’t they get a job by making their own job?

  9. TiP,
    I respect a self-employed person with a sound business plan. However, I believe that many of these “DIY” jobs are simply the result of easy credit.

    IMO, this creative class bubble has already started to implode. Multiple restaurants have recently closed or changed hands. I just read an article in the O business section where an Alberta boutique owner was whinging about slow sales. Portland may be weird but I think its going to be hit hard by the ongoing CRE implosion.

    (Disclosure: I am shorting UMPQ.)

  10. se_renter-

    A friend poorly managed a flip in California. The market was going up so fast that his poor managment actually made him money. Those days appear to be over.

    I certainly don’t fault people looking to extract some economic opportunity, but most don’t price the risk of a slowdown into their plan.

    I always wonder who is the bigger fool.

  11. I have been following this blog but have really gotten tired of a bunch of folks whose only purpose here is to cast gloom and doom over Portland realestate.

    Either these guys are thinking they can impact the housing prices by their mostly meaningless comments or they are renters who saw PDX prices jump before they could buy a property and are now comforting themselves by telling everyone and themselves that PDX realestate is not that great anyways.

    Either way such opinions are worthless and useless to anyone who is serious about evaluating the PDX realestate market scene.

  12. It amazes me how people who rejoice at the increasing unaffordability of housing think it’s everyone else’s duty to join them in celebration. Even more galling is the idea that it’s all just sour grapes. It says a lot about our cesspool culture.

    I got my education years ago. I guess I shouldn’t care if the schools all close or if college costs makes getting a degree open only to the few. If you disagree you’re just bitter because your children may want an education.

    Here’s another example. I don’t have kids and am middle-aged. Why should I care about sustainability or global warming? After all, it doesn’t affect me or mine- I’ll be long gone. That’s the same attitude, austinrelo.

    Sorry Charles, couldn’t resist.

  13. I have been following this blog but have really gotten tired of a bunch of folks whose only purpose here is to cast gloom and doom over Portland realestate.

    austinrelo:
    Yeah, how inconsiderate of those people sharing their impression of the market and economics like that.

    Only the NAR is qualified to talk about real estate prices and they’ve been spot-on about how the bottom is right around the corner … every month for the last year.

    Either these guys are thinking they can impact the housing prices by their mostly meaningless comments

    Yeah, these guys have some nerve think’n that.

    Oh, wait, but this is a pretty obscure blog in the whole scheme of things, so how did they manage to cause this credit crunch and all?

    or they are renters who saw PDX prices jump before they could buy a property

    yeah, us property owners don’t care if most everyone is priced out of the market and can’t afford to buy anymore now that the easy credit is gone… We don’t care that the next generation of buyers is going to be in debt slavery for their whole lives in order to keep prices right where they are…

    uh, do we?

  14. austinrelo-

    I wonder if I am included in your “gloom and doom” group. Certainly I have spoken about how failurs can and do take place (here I do it once again), yet at the same time I have spoken about how many people are happy being home owners, for a variety of reasons. So who are you including in your “doom and gloom” group?

    Next I wonder if a person really believed that it was going to be doom and gloom, should they just say rosy things about the market?

    And finally, among all the “doom and gloom,” you sure know how to bring such nice words to this dicussion.

  15. I think this continual negative portrayal of a relatively healthy realestate market is unwarranted.

    I dont believe PDX ever saw the big jump seen in CA, FL and AZ etc. This is *one* of the reason our prices do not and will not reflect softening of prices in those regions. We may not see 7%+ appreciation of last year but I strongly believe (based on many unbiased reports — not analyst opinions) that our housing will remain stable with about 3-4% appreciation.

    I feel a lot of pessimists are trying to scare potential buyers from buying property when mortgage rates are so attractive and sellers are becoming realistic in their expectations.

    Falling housing prices are bad for owners, renters, state and everyone else. Lets not spread ambiguity and uncertainity just because the immediate loss is someone else’s.

    Also, paying too much attention to negative opinions from analysts is as dangerous today as it was when these analysts encouraged people to buy realestate in CA and FL at the height of the housing bubble.

    At the end of the day the market is local. What happens in FL, CA has little effect on a strong and stable market like PDX.

    Lets be reasonable in our analysis.

  16. austinrelo-

    One observation that I have made, and it is fully supported by statistical data, is that homes are not selling as fast (i.e. days until sale is high, and days on the market is too high). My neighbor has had their home on the market since February. I don’t know about your opinion, but I think that is just too long to be on the market. The guy across the street didn’t sell until he reduced his price “below purchase price 18 months ago.” It was only slightly below, but I am sure the transactional costs killed him.

    Is this a reasonable analysis?

  17. Let’s see if this one makes it through… (I keep getting this message: We’re sorry, your comment has not been published because TypePad’s antispam filter has flagged it as potential comment spam.)

    Falling housing prices are bad for owners, renters, state, etc

    How are falling prices bad for each of these groups? Especially renters looking to buy?

  18. The recent buyers want the rest of us to buy into the idea that falling prices are going to sink us too. People like Austin think we can talk down the market which is ridiculous. They want to blackmail us into propping up their “investments” so that we don’t get the recession everyone is predicting. They want us to believe they care about the greater society when all they really care about is the value of their house. Such self-centeredness masquerading as altruism is simply breathtaking.

    I’d like to ask if 100% increase in 5 years isn’t the same bubble seen in other parts of the country? I’d also like to ask if the analysts who see us as grossly overpriced are simply trying to ruin the recent Portland homebuyers party?

    I guess if you are watching the value of your house deflate you must blame someone. Complaining about we bitter renters is one way to cope, apparently.

  19. I’m a home owner. I bought in the early 90s. At this point it really doesn’t make any difference to me if my house goes down 50% in value so long as all other houses in the the same market go down by a similar percentage. In fact, I’d probably be better off since I wouldn’t be paying as much property tax.

    The recent buyers want the rest of us to buy into the idea that falling prices are going to sink us too.

    As far as I can tell, Naysayer, more people will ultimately come out better off as a result of falling prices. There really aren’t a lot of losers except for the recent buyers who will lose big – but that’s what happens when you have a buying-frenzy-bubble.

    People like Austin think we can talk down the market which is ridiculous.

    Indeed. I don’t know what austinrelo is worried about. If he/she actually thinks we can talk down the market, then the market must be very fragile indeed.

    Most people have no idea how bad things are in the credit markets right now. The world banking system is balanced precariously on a knife edge. Being in Portland won’t save your real estate prices if the whole financial system falls over. I don’t want to sound too alarmist here, but that’s just the reality right now. Things are worse than they were in August. We’re in a crisis of confidence because nobody knows what these mortgage backed securities are really worth. The Treasury dept. under Paulson is only making things worse by trying to get the big banks to sweep everything into a “super SIV” or whatever they’re calling it this week. Hopefully Citi’s announcement last week that they were going to bring SIV assets on the books will help – though in the short term this could be really bad for Citi, in the longterm it should be good for the system.

  20. austin relo,
    This is *one* of the reason our prices do not and will not reflect softening of prices in those regions.

    such absolute certainty is charming in its naivete.

    you are mis-informed, however. although not in las vegas territory, the run up in inventory and prices in pdx is similar to san diego. its very foolish to believe that this city will magically be spared. good luck with your real estate transactions.

  21. I am not being certain or naive but realistic and telling you the side of story you dont want to hear.

    >>the run up in inventory and prices in pdx is similar to san diego

    Really!!! I dont think your analysis is correct. Even if it is correct how much speculative, subprime mortgages were happening in San Diego as compared to PDX? And what about Seattle area, it saw the *big* rise too, does this mean Seattle is also seeing depreciation?

    Please understand, realestate is more complex than a naive one-to-one correlation between OR and FL realestate. You look like the naive stock investor of 1999 🙂 — emotional and irrational

    Why is it difficult to accept that in some regions of US realestate growth was a unrealistic+fast (CA, FL), in some the it was realistic+slow and in some it was realistic+healthy (OR, WA)?

    see the Nov 2007 realestate report at
    http://www.repdx.com. Most areas have >4% increase 🙂

  22. Headline from the Nov 2007 report. Enjoy!

    The Portland-area real estate market appears to be holding its own, as November 2007 results reveal.

    A slower sales pace than 2006 mean longer marketing times for home sellers. Homes sold in November averaged 67 days on the market. Between October and November, the housing inventory stayed flat at 8.3 months.

    Nevertheless, prices continue to rise in most market areas, ever so slightly. On the whole, the 12-month average sale price appreciated 6.5% to $340,900, while the median rose 7.0% to $288,900 when compared to the 12-month period ending November 2006.

  23. From looking at the numbers it seems Columbia County is the place to be!

    I thought close-in was the best place to buy in Portland? Are these appreciation numbers accurate or somehow skewed, perhaps manipulated?

  24. PDXLover: This is one set of numbers in this case from RMLS. Other sources such as Case-Shiller showed month over month declines in PDX in the last release (I believe that was the report on October) – from looking at their numbers it seems that PDX peaked in about July. Still other sources such as housingtracker also show declines in median prices over the last six months ( -6.5% ) and over the last year (-6.4%). Each of these sources has a somewhat different methodology.

    If you’re looking only at the numbers posted at repdx then you’re getting only the rosiest rose colored view.

  25. Just download the latest report, and to be fair, the Case-Shiller report showed a decline in their index from the summer high till September well less then 1%.

    RMLS showed an even bigger drop from the summer high till September. Then the data trends upward from September till the recent report.

    To characterize RMLS data as the rosiest does not appear to be accurate.

  26. My wife and I are current renters and transplants from out of state. We would like to purchase a home and have been looking in the NoPo area where we currently live and enjoy (and can afford to buy). While owning our own home would be a dream come true for us, the sticker shock of the houses we have looked at (we are from a smaller market and 230k-250k for an 800 sq. ft. house has been hard to digest) combined with the uncertain market is causing some anxiety. Buy? Wait? Will our money buy a better home for us down the road? I feel our realtor isn’t providing the best advice/service, info and opinion from other perspectives would be nice. Thanks

  27. There is absolutely NO point in buying a house now. This market is bad and going to get much worse. Portland is not exempt. Any realtor who says otherwise is lying to you.

  28. Any commenter that says that now is not a good time to buy real estate is lying to you.

    What’s the difference Tiffany? Apparently I can’t say it enough: real estate is personal and everyone has their own reasons to be in our out of the market at any time.

  29. My two cents: The thing is that the common man/woman are priced out of the market. An average family earning an average income cannot afford to buy a home here. We can talk about how great Portland is but if I’m stongly considering moving out of state in order to afford a home, how many other families are considering the same?

    I would imagine a mass exedus of potential home buyers would not help the market either.

    It makes sense to me that home prices will fall in Portland until the common family can afford a them. You can look at all of the reports you like but it will not change the fact that those common folks who waited will continue to wait or move out of state.

    As far as the increase we saw during the summer, I’m inclined to believe that was the result of many who felt if they did not buy right away they would forever be priced out the market.

    I personaly know someone who bought a house in June. They bought it for a couple thousand over double what the previous owners paid for it in 98. I don’t know about the rest of you, buy my salary has not doubled in 9 years. This is why the current prices, at least in my opinion, are not sustainable.

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