Sunday, February 17, 2008

Portland Market Melts Down

My first reaction after seeing the January RMLS statistic was something along the lines of “Holy cr@p, the market has imploded!” But after analyzing the data a bit more I realized that the past few Januarys have seen significant jumps month to month. So even though months of inventory jumped another 50% this month, that's not unusual for January. Given the historical trends, I expect the months of inventory will drop in February, so don’t be fooled with the realtors all crow about how months of inventory has peaked and is now dropping.

The trend to keep an eye on is inventory growth. While the total inventory is shocking, the fact that the growth rate has also increased over the past few months shows that the market continues to get worse.

So what’s driving this? If you combine the inventory data with the recent sales data that show average prices increasing while the median price is flat (over on Clint’s blog), I think what we’re seeing is that entry-level buyers, those with less than 20% for a down payment, or those with lower incomes are finding it harder and harder to buy. This will have a ripple effect on seller’s trying to trade up to larger homes.

I’ll post more comments once I’ve analyzed the data a bit more closely.


Anonymous said...

If you look at asking prices we are now showing a linear rate of decline for 1 year. In other bubble cities this presaged the complete absence of a spring bounce. Also, the new PMI limits will virtually freeze loans with >85% LTV. The new jumbo light limit will further dampen both demand and originations (buyers and brokers wait until they go into effect in the fall).

Whats interesting is that these negative headwinds will hit the 280+ market harder than the FHA-supported lower end. If Ryan Frank's estimate of 1 in 5 being upside down is factual, then things are about to get very very ugly.

Time to add more UMPQ and WCBO puts!


skeptictank said...

I don't think even the most bearish among us thought that PDX inventory would jump up over 12 months in January 08. But there it is. Not only that, but the raw number of units on the market is about 30% higher now than it was a year ago (using the housingtracker numbers). Lots more houses are going to be going on the market over the next few months with the Spring selling season. It's possible that we won't see months of inventory decrease much this Spring - we could stay up over 12 months for a while.

PDXOutsider said...

i agree, even i didn't see 12+ months of inventory coming! but with sales down 30%, and raw inventory up 30% that's what you get.

although i don't have an accurate count, i see lots of houses going off the market these days. some obviously get relisted, usually with a different price, but i wonder how many eventually go into foreclosure?

Anonymous said...

RE agents will tell you that the high inventory just means a better selection for buyers!

They have such sunny outlooks!

Anonymous said...

Even after allowing that inventory jumps every January, during this particularly January, months of inventory increased by more than 100% compared to last January.

That 100% jump is not really obvious in the YOY % change axis (that axis probably uses inventory, rather than months of inventory)...

Ian said...

the axis on the right shows year over year change, and you can see it's been hovering around 100% for a while, and has increased over the past three months.

and higher inventory is certainly better than lower for buyers, but not overpriced inventory!