I thought I might write something scentilating regarding lead based paint but that would be the easy way out of what has become a very contentious topic: Portland’s housing market. Nationally and locally the economic outlook isn’t good. There is a lot of uncertainty. Sure, Portland’s market has fared better than most of the nation to date but it is not impossible that prices will fall. I’m more optimistic than those that think there will be a 20%+ correction but going into a real estate transaction now without acknowledging the possibility is folly. Somebody is going to be right on this one but calling it now is tough.
I’ve been thinking about who the “winners” are in a housing market crash/bubble burst.
1) Homeowners- that lose their house or equity. Equity is only realized at the sale.
2) Properties- less money to spend means less investment into properties. This can be remodel upgrades or simple maintenance. Deferred maintenance is the single largest category of repair items in inspection addendums. Less work on houses equates to fewer housing related jobs and therefore see #4 below.
3) Renters (at least some (I’m thinking single family home renters as the economics of apartments is outside the scope) – I am not a renter so correct me if my assertion is wrong- Increase demand for rentals drives up rents. Homeowners, tight on cash, have less desirable properties (for reasons above) but they rent because of the increased demand. This equates to renters paying more for less property (this may be negated by a large number of once-condo-now-apartments in the Pearl etc.. Some renters receive eviction notices- I have never seen a bank owned property with tenant. I’ve never evicted or been evicted but I don’t imagine that a bankrupt landlord has deposits at the ready to return (tenant/landlord law notwithstanding). Maybe someone has experience being a renter where the home went into foreclosure. I’d expect the cost of moving assuming a rental truck, deposits, time, etc. to be about $2000. A landlord requiring first last and a deposit could be looking for upwards for $4000 cash.
4) Banks and the economy. Not sure why I put these together in retrospect.
5) First time buyers (this one could go either way)- Prices drop so the market becomes more affordable and a larger segment of the population can enter the market if they desire. Because of the crash, they now “need” 20% down in order to purchase (I’m willing to bet that there are loans requiring less than 10% down still exist). A $200,000 house in 2005 could be bought for basically any amount of money down (not discussing here whether that is a good or bad thing, just fact). Now a $150,000 house doesn’t necessarily require it on paper but 20% down is $30,000. Did the buyer pool expand or contract?
6) Neighborhoods (ignoring the gentrification debate which is a topic unto itself)- Flippers and true remodelers are less able to invest in neighborhoods so houses that might have reborn aren’t. My point here isn’t whether whether flippers/remodelers are building appropriately, quality or respectfully but that they are not investing into the community.
The winners may be those who stuck to fundamentals: put 20% down, used conventional loans and invested equity they may have pulled out back into the property. They should be able to whether the bumps in the road. Though they have fewer options. Investors like SRS seem to be doing well. Investors with cash to invest in real estate (not stocks about real estate) will do well. Anybody that finds the bottom of the market as a buyer should do well. Do renters win? I don’t feel qualified to answer for them.
I’ve read through the above a couple of times and don’t see anything incendiary about it but knowing from past history, I’m sure it will be taken issue with. The goal is respectful debate and I hope we can go down that path.
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