Portland Median Existing Home Prices Continue to Slide - Down 7.6% YoY (Case Shiller)

The median price of existing homes in the metro Portland area fell 7.6 % year over year in August 2008 according to Case Shiller, continuing the trend that began in July 2007. This is down 7.8% from the peak in July 2007, wiping out any gains made since April 2006.

The index fell 1.3% from July to August. The slight month over month gains we saw over the summer have now reversed and the decline is accelerating.

The chart above clearly shows that there was definitely a bubble in Portland, and it is now deflating.

Last year in one of my first posts I predicted that price appreciation would go negative before March 2008, and looking back it looks like I was right.

The chart above shows the price index, and you can clearly see the bubble forming in 2004, accelerate in 2005 and then start to slow in 2006.

I am now predicting that prices will be down 9% by the end of the year (down from my 10% estimate a few months back).

The above chart shows Portland, Seattle, the San Francisco bay area (the other areas I consider as closest to Portland) as well as the 20-city composite index. Portland and Seattle are tracking each other nicely, still about a year behind the rest of the market. While the 20 city index has started to flatten out the San Francisco Bay area has really fallen off the cliff and continues to plummet.
This chart above shows the price index for the past three years. You can more clearly see the seaonality, as well as the fact that prices are back to April 2006 levels and dropping.

This chart shows the previous bubble in the early 90's, and also shows that Portland prices had never dropped over the past 20 years. But as they say, past performance is no guarantee of future performance!

(EDIT) - I have added the charts and more analysis. Sorry for the delay, I lost the post a few times and had to find the time to recreate it.


ABOUT CASE SHILLER:
The S&P/Case-Shiller Home Price Indices measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan regions across the United States. These indices use the repeat sales pricing technique to measure housing markets. First developed by Karl Case and Robert Shiller, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions.

Double Check Those School Districts

I've seen a lot of listings with mislabeled school districts. This can obviously affect the price of a house considerably, and lead to major disappointment if you're looking for a specific school.

Before you get serious about any property you're looking at (at least in Portland) run the address through the Portland School District website (here) to confirm where it sits today.

I know the boundaries have changed considerably recently and will likely continue to change, but frankly I wouldn't trust anything in the listings as they seem to be wrong more than right in my experience.

The post below is a classic example. I can't prove it was mislabeled incorrectly on purpose, but it wouldn't surprise me as Grant is ranked higher than Jefferson in recent school ratings.

I have also added a link to the Buyer's Resources to the right for future reference.

Update - 5421 NE 25th Back on Market, now $319k

Back in July this little gem was on the market for $129k. It sold for $165k to a couple from West Linn, who have re-muddled it and put it back on the market for $319k$304k. (RMLS# 8099354)

It was in pretty rough shape back in July, this info was provided by Ron Ares: "Approach w/ caution, unstable flooring. Property will not qualify for conventional financing. " Ouch.

It has also had an interesting sales history:

07/29/2008	SW(Bank Sale)	2008112745	$165,000.00
06/23/2008	TR(Foreclosure Auction)	2008095071	$182,628.00
08/29/2006	SH (?)	2006171253	$45,341.00
04/27/2006	WARRANTY DEED	2006078573	$251,000.00
12/17/2001	SW(bank sale)	2002014876	$18,100.00

Here's a photo of the house as it sits today:

A couple things I noticed looking at the distorted photos (come on folks, don't you have someone in the office that can upload these things so they don't look like you're in looking in a funhouse mirror?) First, they put the new electrical service right smack dab on the front of the house. Would it have cost much more to keep it on the side as it was originally, so it's not sitting like a pimple on the house's face?

Second, check out that door opening? I'm all for open floor plans, but couldn't they do it without a big pillar in the opening? That just screams poor planning.

I'm also pretty sure those are not the "original hardwood floors" as advertised. I could be wrong, but when I see them stained that dark I assume they're trying to hide something. These look new to me based on the width.

To their credit the work was actually permitted.

At the current asking price that's a steep $282k per square foot. Pretty steep in this market, at that location. Good luck!

Thanks to Will for the update! Please keep them coming folks, if you're in the market or just see an interesting house, bad remuddle, outrageous flips, etc. send me the info and I'd be glad to feature it here.

Foreclosures Double in Portland

(Karen Rider (foreground), an agent for a trustee sale officer, conducts an auction of foreclosed homes on the Multnomah County Courthouse steps just inside the building. Photo from the Portald Tribune)

In what should be no surprise to the readers of this blog (since I have covered it previously here), the Portland Tribune reports that foreclosures have doubled in the past year in the Portland area. In August 2007 Portland ranked 332nd out of the 383 largest metropolitan areas. By August 2008 we've moved up to 254th. (source: First American CoreLogic). Over 300 Multnomah county residents have been hit with foreclosure notices, surpassing the peak from the 2001-2002 recession.

Portland is no real-estate basket case like Las Vegas or Phoenix. But the national foreclosure crisis that initially spared Portland has arrived here in a big way, bringing more human suffering and dampening housing prices.

The number of Multnomah County residents in jeopardy of losing their homes has nearly doubled in the last year, based on the number immersed in foreclosure proceedings. Over the spring and summer, 300 Multnomah County homeowners a month got slapped with foreclosure notices – topping the peak levels reached in the last recession of 2001-02.

In August 2007, the Portland area had an enviable 332nd-highest foreclosure rating among the nation’s 383 metropolitan areas. But by August 2008, Portland jumped to 254th-highest, according to First American CoreLogic, which provides real estate data services.

“There’s a shakeout right now, and we’re failing on all cylinders,” said Portland real estate economist Jerry Johnson.

Portland took longer than most cities to emerge from the last recession and didn’t get as overbuilt as other markets, Johnson said.

But Portland home prices kept rising during the last recession, he noted. If banks and besieged homeowners try to dump too many discounted properties, he said, “you could swamp the market and kill the guys who are OK.”

Home prices are sliding in large swaths of the metro area, especially in overbuilt sectors such as Portland’s condo market and suburban Happy Valley. In early October, in the 97086 ZIP code that includes Happy Valley, there were 247 homeowners facing foreclosure on top of 95 homes seized by banks, according to VisionCore, a division of First American CoreLogic.

I encourage you to find the print version if you can, the charts in the print version are not included in the online version. Here are a few stats on the number of foreclosure notices by zip code for 2008:

West
97201: 21
97209: 52
97210: 17
97221: 13

North
97203: 121
97217: 128

NE
97211: 123
97212: 55
97213: 59
97230: 115

SE
97214: 29
97215: 39
97202: 58
97206: 178
97266: 202
97236: 194

So far the foreclosures seem to be hitting the North and the outer NE and SE the worst, which is not surprising given that on average those areas have lower incomes and owners are more likely to be one unfortunate incident away from financial ruin.

I will continue to look for more local data, this is the first data I have seen by zipcode, provided by First American CoreLogic.

Offtopic: Outraged Lehman Brothers' employees blockade the corporate headquarters

"Party inside the spacious living room..."

From the "truth is stranger than fiction file" comes this reader sighting (RMLS #8058002). The actual listing text is below:

Party inside the spacious living room or on the covered patio; great place to invite friends over for good times. Two cozy fireplaces w/ gas inserts. Large brick barbecue in fenced back yard. Lots of new double paned windows w/ vinyl frames, new oak laminate flooring in living room. new roof on garage. lots of extras.

There are 6 photos posted, and the last one is this:


Damn, those are some serious party animals. I'd LOVE to party with them. Knowing how much fun can be had in this house will DEFINITELY help it sell.

One Problem We Aren't Facing

This isn't strictly Portland related, but I thought you guys might be interested.

We had dinner with a friend from Boston who's been watching the housing market there, waiting for prices to drop to the point where they can afford something (patience...) and she had a great story.

Apparently there are so many houses that went into foreclosure, or were bought back by banks last winter, and ended up sitting vacant over the winter. The banks would turn down or turn off the heat to save money, and of course the pipes would freeze and burst. SHe has seen a number of houses that at a minimum have holes in the floor from water damage, and in the worst cases have developed nasty cases of mold.

I can't imagine that banks did this intentionally, but it speaks to the volume of properties that they must be dealing with, overwhelming their reduced staff.

Luckily we shouldn't have that problem here. But I have been seeing more and more houses that look like they've been empty for a while.

10% off Any House Nationwide! - Except Portland

This truly smacks of desperation. As featured in the Portland Business Journal, "NW markets just say no" Caldwell Banker is trying to run a national promotion for 10% off any house listed with them. However the PNW STILL thinks that we are immune, and not in as bad a shape as the rest of the country, even as prices have dropped over 7% and continue to fall.

"The Portland and Seattle affiliates of Coldwell Banker Corp. are refusing to participate in a nationwide sales promotion designed to push the housing market past the “tipping point” to recovery.

Starting today, Parsippany, N.J.-based Coldwell Banker is pushing a 10-day sales event, boasting 10 percent discounts on the price for homes listed for sale with Coldwell Banker affiliates. The campaign is being promoted nationwide, leading to confusion in markets where franchisees are refusing to participate.

In the Northwest, Coldwell Banker affiliates in both Portland and Seattle say the “sale” undercuts the role of professional agents and aren’t participating. Not only must agents take a cut in commission, but sellers receive 10 percent less than their asking price.

Gail Fisher, president of Coldwell Banker Barbara Sue Seal Properties, which has about 440 agents in the Portland area, said the national sales event is inappropriate.

“We feel that every situation for pricing for a property is very individual,” she said. “I feel it sells short the services we have to offer for our clients.”

An across-the-board 10 percent price cut isn’t right for every property and ignores the professional skills agents bring to the table when they list homes and work with sellers to set realistic prices."

There are so many things wrong with the story I don't know where to start. But I'll try.

"Starting today, Parsippany, N.J.-based Coldwell Banker is pushing a 10-day sales event, boasting 10 percent discounts on the price for homes listed for sale with Coldwell Banker affiliates. The campaign is being promoted nationwide, leading to confusion in markets where franchisees are refusing to participate."

First off, from a marketing perspective, if it's being promoted as a national promotion, it truly has to be a national promotion. Consumers aren't stupid, they can see through false claims. And you'll need a lot more than 10 days to blow out the 9+ months of inventory we're currently sitting on.

"In the Northwest, Coldwell Banker affiliates in both Portland and Seattle say the “sale” undercuts the role of professional agents and aren’t participating. Not only must agents take a cut in commission, but sellers receive 10 percent less than their asking price."

Here are the two big issues. Sellers still haven't accepted the new pricing rules, and are chasing the market down. Realtors can't do the math that says that any sale at any price is better than none, or Anything > Zero.

“We feel that every situation for pricing for a property is very individual,” she said. “I feel it sells short the services we have to offer for our clients.”

An across-the-board 10 percent price cut isn’t right for every property and ignores the professional skills agents bring to the table when they list homes and work with sellers to set realistic prices."

So Gail, just how successful have you been when it comes to setting realistic prices? If prices were set properly we wouldn't be sitting on 9 months of inventory right?

"However, Fisher said the Northwest housing market has not stalled to the same degree as the more bubble-prone regions of the country, namely Florida and California. A sale might work in a market where prices have collapsed."

Sigh, still repeating the "we didn't have a bubble mantra" Gail? For anybody that still thinks we didn't experience a bubble, here once again is proof that we did. And while the PNW is late to the party, we're definitely at the party now.

"In Metro Portland, the median price of homes sold in August was $280,000, down about 7.3 percent from this time a year ago, according to the Regional Multiple Listing Service. Any drop in price results in a corresponding drop in the commission paid to the agents who broker the eventual sale."

This comment hides the real issue. While prices are only down 7%, sales are down over 30%, so total commissions are down over 35%. Look at what's happening to the auto industry with 30% drop in sales and you'll understand why real estate agents are freaking out. Many are making no money, and the rest are making much less. Only a few creative real estate agents who saw the impending meltdown and have changed their strategy are making any more money.

"In a video explaining the sales event, Jim Gillespie, president and chief executive officer of Coldwell Banker Co., said the event will help bring about a recovery in the housing market and help buyers take advantage of a new $7,500 tax credit available for first-time home buyers. The event will help move the market over the “tipping point” to recovery, he said."

Again, just so everyone knows, that $7500 tax "credit" is actually an interest free loan that you much pay back over 10 years. We I can't lie with my marketing but the government can is still beyond me.

"A survey of Coldwell Banker agents in the United States found that 56 percent think prices in their market are too high and that 77 percent believe their sellers have unrealistic expectations about the value of their homes.

Nearly 80 percent said when homes are priced appropriately, they attract buyers and sell faster."

Homes will not only need to be priced right, but buyers will actually need to have a real income and a real deposit. And banks will need to have access to credit to be able to offer loans. We have a long way to go before all that happens.

Thanks to Portland Gentrification for the link.

Wells Fargo Jumbo Rates Over 9%

I haven't been tracking rates lately, and certainly not jumbo rates, but I'm pretty sure this is a pretty major jump.

This isn't going to help anybody sell those high end properties anytime soon.

Chicago Cop Won't Evict Renters

A local sheriff in Cook County Illinois has decided not to evict renters that are evicted when their landlord falls behind on the mortgage.

"CHICAGO - The sheriff here said Wednesday that he's ordering his deputies to stop evicting people from foreclosed properties because many people his office has helped throw out on the street are renters who did nothing wrong.

"We will no longer be a party to something that's so unjust," a visibly angry Cook County Sheriff Tom Dart said at a news conference.

"We have to be sure that when we are doing this — and we are destroying some people's lives — we better be darned sure we're talking about the right people," Dart said.

Dart said he believes he's the first sheriff in a major metropolitan area to stop participating in foreclosure evictions, and the publisher of a national foreclosure database said he's probably right."

Good for this guy. He might go to jail for it, but it's nice to see someone doing something positive these days. If the banks were smart they'd try to sell the house to the renters instead of taking it back.