We keep hearing how the "Gloom and Doomers" are overstating the problems. After all, the pundits tell us, "All real estate is local," so not all markets are feeling the pain. There are still "bubble-proof" markets like Portland, Oregon:
NORTH PLAINS, Ore. - Here at the western edge of the Portland metro area, green fields flow into fir trees and foothills and eventually the Coast Range. They are a developer’s dream: flat, picturesque and a quick freeway spin from the region’s high-tech center.
If this were Phoenix or the San Francisco Bay area, real estate experts say, master-planned subdivisions would carpet these fields all the way to the mountains. Instead, their foot-high grass faces out on just one new, 15-lot cul-de-sac, buffered by strict growth controls that help North Plains maintain its rural feel and help shield Oregon from the housing crisis stunting the national economy.
While home prices fell by about 20 percent in the Sun Belt and the Midwest over the last year, values here in the northwest corner of Washington County rose 4.5 percent, according to local real estate statistics and a federal housing index. Prices overall in the Portland metro area dipped slightly; only Charlotte fared better among major cities.
When presidential hopeful Hillary Clinton tried to highlight housing woes in Oregon in May, the experts she assembled acknowledged that the market here has been holding up better than most. Analysts say Clinton and other politicians could learn from this state, where experts credit land-use restrictions and a late-blooming economy with keeping housing prices afloat.
For Portland, like the rest of the nation, high home prices make for tougher financing, and the effects of the economic slowdown are being felt all over. When you look at the statistics, things don’t seem quite so rosy. According to local real estate broker Charlie Phillips, this was the picture in April:
In the Greater Portland Metro area for the twelve months ending April 2008 the average sale price fell 3.9% to $325,000 v. $338,200 in April 2007. Our multiple listing service indicates this may be partly a result of a 51.2% decrease in the number of $1 million homes sold during the period (21 v. 43). April 2008 had 5.8% more new listings than April 2007 while Closed and Pending sales fell 35.1% and 34.6% respectively for the same period. At April’s rate of closed sales, the 20,248 Active residential listings would last about 10.3 months (if there were no additional listings for the period.). Average market time in the Portland Metro area in April was 75 days. By contrast, in April 2007 the selling time averaged 58 days.
Agents Charles and Jennifer Turner try to put a more positive spin on the situation:
The bottom of the slide is out there somewhere. It could be today, it could be years off. We’ll all be able to see where the bottom was because we can only see it through historical data. Everyone wants to buy at the bottom and sell at the top but that is not how markets work. Case-Schiller reports put Portland’s current values at 2006 levels. We didn’t hear too many sellers complaining back then. If you bought before 2004 and haven’t sucked the equity out of your property, you’re probably going to do okay when you sell. Not as good as you might have but still not bad.
But for the most telling story, I think the Portland Housing Blog tells the story best with this graph:
[Portland is the second line from the bottom. My apologies for needing to reduce the graph size.]
It doesn’t take a massive inventory overhang to break a housing market. A cooling economy, lower demand, a tougher credit market and falling home prices can all take their toll in the absence of a huge bubble.
Portland, welcome to the club.
Some areas will certainly feel the pain less than others, however, there will be few that escape the continual downturn all together.
The triple disaster of falling home values, rising fuel and rising unemployment, will continue to drag housing down for some time to come.
Pointing out a few areas that are fairing better than others does little to provide solace to those in foreclosure, and only serves as a distraction from may well be the worst years since 1929.
May I chime in? I live in West Linn, a slightly southern, older semi-rural suburb of Portland. We share our access to the beautiful Willamette river. Most common occupation here is manager, software engineer, that sort of thing. My street is full of homes built in the 40s and 50s, mostly on half to acre and a half lots. Plenty of trees, small street, no sidewalks.
Infill developers went nuts here two years ago, AFTER the bubble burst. On my 1/4 mile street alone three developers have: The first bought and tore down a nice ranch home on a ‘double lot’ and stuck two McMansions on his lots (next door to me), but has only sold one after two years. The second developer bought a small home on a large lot, tore it down last summer, then couldn’t fund the spec house. The lot is for sale, with no house. The third developer bought a house at the end of the street with 3 point something acres. He’s being foreclosed on… asking price is about 200k below what he paid for the house and lot A YEAR AND A HALF AGO. 615k.
Up on the main road, just north of Marylhurst University, there were four million dollar new, spec ‘infill’ homes for sale. Two sold, one hasn’t…. the third is a 1.3 million dollar foreclosure. About 50 yards south of that mess, another infill developer has cleared two lots, but can’t fund the homes. Those lots are for sale, too.
Oh, and that idiot that bought the McMansion next to me? Paid 740k. For that money, you could buy a river view, and a big lot, 200 yards down the street. He has no yard, pavement everywhere, but at least he has a shop. Oh, and he’s a mortgage broker, so he’ll probably last about one more year.
Portland area is sure ‘different’ from the rest of the ‘housing crises’ areas. Many here still haven’t bought a clue!
These of course don’t show up in the ’statistics’ … but they’re real.