Market Condition Change Warrants Your Attention
by Lee Davies
While everyone wants to know when the housing market is going to rebound, the exciting news for those of us in the industry is that this may be the year of the flat line! Since June of 2006 we have watched market values erode, in excess of 10% per year for a couple of years, but in 2010 the rate slowed to 8.7%, and this past year according to Standard and Poors Case Shiller index, Portland’s values decreased only 4.7%. For many folks this may still seem disappointing, but for home buyers this is excellent news, especially when you combine it with the fact that mortgage interest rates have set new record lows in the 4% range. However, this is only one form of measurement, so here are some items that we, the troops on the ground here in Portland, would like to convey.
Year End Stats: 2010 2011
Inventory is Down 45,691 34,084
Sales Units are Up 18,926 19,682
Market Absorption Improved 7.9 5.3
It is common knowledge that, as inventory tightens, price begins to stabilize, and we are seeing it on the front line when working with buyers. In years past we touted that the reason to buy now was that buyers finally had the ability to shop as there was a broad selection of homes. Today, we have more buyers than sellers who are eager to snatch up a home at a 4% fixed rate mortgage, but the selection is not there. Buyers, like Realtors, are anticipating the typical increase in inventory this spring as home sellers wait for the sunshine to show their homes. But in the past few years, the carryover of inventory of available homes caused a glut of inventory in the spring. This is not the case today.
At the end of 2008, the actual market absorption (time needed to clear out the current inventory of available homes) was over 14 months. Today, those rates are down to 5-8 months. The actual market absorption rate for your home may still be higher or lower than these figures and that is dependent on your location, price range, property type (single family home, condominium, acreage, etc).
Another positive indicator is lot sales. Between 2008 and 2010, very few, if any, builders were buying lots as there was no available financing, and by the time builders would finish building the home, it was apparent based on market trends that the home could be worth 10% less than what they had projected. A leading optimistic trend is that builders are now buying lots; in fact they are scrambling for them. Some are able to get some traditional financing, but most have established creative private sources of funding to conduct business. In 2009, based on the market absorption, it was not uncommon to see that there was a 3 year supply of available lots, and now that figure is closer to a one year supply, but worse yet, much of the supply is made up of the “left overs” – the least desirable lots.
Finally, it was recently reported in the Oregonian, that the actual number of foreclosures in Portland was lower than anticipated, once again suggesting when combined with these other bench marks, that the market appears to be stabilizing.
If you would like to know specifically where your property stands, or would like to begin formulating your real estate/home buying, selling, downsizing, or upsizing plan, please contact one of our brokers. In my opinion, this is a very pivotal time to either make the move or develop your strategy for the years.