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Turner Realtors in the News

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We’ve had a pretty good run recently with media coverage. Going back through Google searches looking for the articles was a trip down memory lane. Interestingly and annoyingly, I had to pay to get the archive stories from the Oregonian. It’s also a reminder that links to their articles die with age.

16 Comments on “Turner Realtors in the News

  1. ““Portland’s [real estate] market did not have the massive appreciation that some of the markets that are hurting now did,” Charles Turner of Prudential Northwest Properties, and author of PortlandRealEstateBlog.com, said.”

    Are you kidding me?

    I suppose “less massive” may be true. But even “less massive” can still be “massive.” I cleared more than a $100K holding a condo for two years and doing nothing to improve it. To me, that qualifies as “massive” (and “bubble”).

  2. I’m not sure how much can be accurately quantified. Using MacroMarkets, Atlanta had a 54% 10-year increase but is down 0.7%. Similarly, Chicago is up 84% 10-year but down 3%. Neither makes much sense. Even more odd, Dallas up only 24% since 2000, but still down 0.13%.

  3. Well, we can argue about the amount of apreciation – certainly some areas of PDX saw much more than 98% over the last 10 years… but don’t look now the bond insurers are hanging by a thread and one of them (Ambac) has already been downgraded and put on rating watch. Several hundred Billion dollars was lost on world stock markets last night and the losses seem to be continuing tonight. The futures markets show the Dow down about 500 (!) tomorrow. This little “subprime problem” is turning into something much bigger and uglier now.

    …if Ambac or MBIA goes down (or God help us, both of them does) there probably won’t be much mortgage lending done for a while. Of course, with their business model, they were functionally bankrupt the day they started.

    Get ready for some tough times folks. I didn’t think we’d see it as bad as it was in 81-82, but now I’m starting to wonder.

  4. …if Ambac or MBIA goes down (or God help us, both of them does) there probably won’t be much mortgage lending done for a while.

    Actually, let me restate that: it’s not that there would be no mortgage lending, but that which would remain would mostly be lending to people who don’t need to borrow. Also, PMI rates will go much higher leading to what many have been predicting: the return of 20% down as a requirement in a large percentage of new mortgage originations. It will take a while to reprice risk if one or more of the monolines goes down.

    In some sense there are parallels to the late 70’s early 80’s: then rates were very high (up to 18%) so few people wanted to borrow at those rates. Now rates are still historically quite low (for now) but lenders aren’t as willing to lend at these rates. Rates were held quite low over the last few years partially due to the bond insurers insuring MBS and thus lowering the perceived risk. What’s been happening the last several months is that the buyers of those securities have realized that the rate they were getting was way too low when compared to the actual risk. Take away the bond insurers and the risk premium has to go up.

  5. Who really cares that almost a trillion dollars was lost Monday in world markets or that the real estate house of cards is shaking? My equity is up and there’s never been a better time to buy!

  6. “Fed Slashes Interest Rate 75 Basis Points- AP”

    As I suggested in the past: If we have a period of inflation (especially if inflation goes “double digit”) coupled with a period of low interest rates (see above for Today’s headline), then housing will be great.

    How can we correctly predict the Fed’s next move?

  7. JP: But if we get double digit inflation lots of other things won’t be “great”…. like $5/gallon gas.

    Remember, Japan lowered rates to 0 in the 90’s and their real estate continued to go down for several years. It’s as if we dug this huge debt hole for the last several years and the Fed and Bush are trying to fill it up by lowering rates and creating “stimulus packages” only to find that the hole is much deeper than was previously thought.

  8. TiP-

    You are right, if real estate is out of balance on a macro level, then it is only a matter of time before a correction will take place, no matter what the interest rates are.

    With that said, if we enter a period of inflation, then the underlying debt will not be as burdensome for current debt holders. Of course wages will need to adjust near the rate of inflation, and if this does not happen, then we might enter a period of stagflation, rather than inflation.

    How strong is the underlying economy might give a reasonable basis for the future direction of housing.

    Given that Intel has been laying off people in this area, and their performance has been lackluster according to some analysts, what does all of this mean for the Western Portland Metro?

  9. Like I said – “less massive” may be true. Although strictly speaking, still massive.

    Based on the Case-Shiller HPI quoted by Macromarkets.com, Miami’s peak occurred at 310, about 100% higher than the baseline trend value of 140-150. Portland’s peak is at 200 is only about 30-50% higher than the baseline trend value of 135-150.

    So, 100% is more then 30%, true. But 30% overvalued is nothing to sneeze at.

  10. “As I suggested in the past: If we have a period of inflation (especially if inflation goes “double digit”) coupled with a period of low interest rates (see above for Today’s headline), then housing will be great.”

    I would disagree.

    What caused the speculative frenzy is not the low interest rates, but the loose lending standards. Those are gone and won’t come again in our lifetime. The Fed has lowered interest rates and increased money supply several times now, and banks are *still* reluctant to lend to each other, let alone lend to end users. The bubble psychology has popped; irrational exuberance has been replaced by irrational fear.

    I’m not downplaying the possibility of massive inflation, though. We certainly seem to be on that track. I just think that people will not get into bidding wars over housing just to hedge against inflation. Even if they want to, they won’t have the financing – after all, the banks will be hedging against inflation, too.

  11. Leo-

    You make a good point about the lending standards. I was concentrating more of the ability of homeowners to make their monthly mortgage payment. Debt in a period of inflation goes down in value, especially long-term debt.

    A period a high inflation would also solve some other debt problems, such as the US Government’s debt.

    One thing that is fairly certain, our Government will print money to pay back debt, no matter how inflationary.

  12. “I was concentrating more of the ability of homeowners to make their monthly mortgage payment. Debt in a period of inflation goes down in value, especially long-term debt.”

    True. With high inflation, I would guess that foreclosures would become less severe. In the end, though, all that does is increase the “stickiness” of real prices, the speed at which they fall, not the equilibrium point where they end up. In other words, asking prices would be even slower to reach market price, and transactions would grind to a complete halt (like what happened to mortgage-backed securities).

    So, I would agree that inflation would reduce foreclosures. But I think that the slower price correction will depress demand for longer, so I still wouldn’t expect housing to be great.

  13. Leo-

    If more homeowners are able to maintain the loan payments, then supply would not be as great. That would bring supply and demand back to equilibrium, or at least closer.

    As I see it, the MBO problem was a little different. Just about overnight the risk in the MBO was re-price. MBOs are strictly financial instruments, and homes do not have this same problem, as people use them for shelter. Also people buy homes that are expected to go down in value, but no rational investor invests in any instrument that is expected to go down in value. The consumer behavior between the two is much different.

    Hopefully we can agree that the tighter lending standards has put an end to the “teller machine house” mentality.

  14. “If more homeowners are able to maintain the loan payments, then supply would not be as great. That would bring supply and demand back to equilibrium, or at least closer.”

    I thought this also initially. But, as the housing bulls like to say, “you have to live somewhere.” People that get foreclosed on won’t go homeless; worst-case scenario is that they’ll rent somewhere. So even though their former residence ends up on the market, they’ll take another housing unit off the market in return. Foreclosures may even temporarily reduce housing supply during the foreclosure process (just like condo conversions temporarily reduced rental supply). I think this one could go either way.

    I do agree that the House ATM mentality is done and that higher inflation will reduce foreclosures.

  15. “But, as the housing bulls like to say, ‘you have to live somewhere.'”

    The problem here isn’t that you have to live somewhere, but rather it’s that interest rates are adjusting upward and homeowners cannot afford the new payments. If they could afford the payments, then many would stay in their existing home, rather than rent. Adjusting interest rates are similar to foreclosures: both are forced moves.

    Ultimately this all boils down to at least one of the following:

    1. Renting in the Portland area today is inexpensive relative to purchasing.
    2. Renting generally forces a person into a unit that they actually can afford on a long-term basis.

    The homeowners who purchased within realistic terms are not having the same problems as the typical subprime borrower.

    There are so many players to blame for this housing mess, but the good news is that Portland housing appreciation is up!

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