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Case Shiller September 2010- Reason for Fear and Optimism

Portland’s Case Shiller Index for September 2010 took a  1.9% hit from August and is now at 144.30, May 2005 levels.  The index is down 3.6% since September 2009.  On a national basis the Composite 10 Index was down .5% for the month but up 1.6% in the last 12 months.  The Composite 20 Index was down .7% for the month and is up .6% since September 2009.   The Composite 10’s 161.25 matches December 2003 and the 20’s 147.49 lines up at about October 2003.

The Case Shiller Index has a two month lag time and uses the seven county Portland MSA area.

Case Shiller Portland September 2010

Some subscribe to the theory that Portland is a year late to the party.  If Portland regresses another year’s worth, the Index would be 126.56.  I don’t personally subscribe to that as the rapid decline has leveled off but there is reason for concern.  I think there may be some up and downs but I don’t see a double digit drop from here.  If we’re a year late to the party we should see a small increase in the next 12 months according to the Composites.

It highlights the importance of accurately pricing a listing.  A listing today is potentially more overpriced tomorrow. In an appreciating market, the property value eventually catches the overpriced listing.  In a declining market the problem is exasperated. Hypothetically, a home that was listed for $500,000 in September 2009 but would have been accurately priced at $475,000 is accurately priced at $462,175 today with no other factors taken into consideration.

Buyers are potentially looking at close to the bottom of the market but we can’t judge that until time passes and we are looking at now as the past.  Portland lost 3.6% in the previous 12 months but lost 11.7% in the 12 months preceding that so the decline has slowed and even increased some months during the year.

Case Shiller September 2010 Longterm

7 Comments on “Case Shiller September 2010- Reason for Fear and Optimism

  1. This is a really good article. I agree with the theory that Portland was late to the party, but I think that things will get a little bit worse before they get better. We live in a very desirable city, and our market will bounce back. Hopefully it will be in 2011!

  2. The late to the party thesis is based upon the fact that Portland’s EZ PZ low doc no doc loans, and products like Alt-A and Option-ARMs were originated mostly from 2005-2007.

    Roughly 1/4 to 1/3 of loans made in PDX from 2005-2007 were these types of loans, and they typically have a 5yr reset/recast timeline. The rate reset is not the issue/risk, it’s the RECAST and new monthly payment when the loan re-amortizes.

    Until these loans all clear (are defaulted or refinanced) prices in PDX still have significant downside risk. Refis for folks who bought 2005-2007 now require bringing significant cash to the table or having sufficient equity to do so. Most who used the Alt-A/Opt-ARM types of have neither.

    We have further to fall through 2012/2013 as the bad debts are defaulted, and the houses come on the market.
    If you’re thinking of buying a house in Portland, keep your powder dry. You’ll be very glad that you did.

  3. Talk about grim, but Portland is a awesome city, even though I live in Albany.

    I know whenever a huge dip is about to happen that a big up potential will eventually happen to.

  4. Portland is a much more pleasant place to live if you aren’t dropping most of your money on housing:O)

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  6. Portland has no business having a $242,000 median home price when Oregon’s unemployment rate is over 10% and median income dropped to under $50k

    Now we want more hand outs to maintain a 5:1 home price to income ratio?

    Insanity!

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