Tuesday, September 29, 2009

Portland existing home prices up again in July - Case Shiller


The July 2009 Case Shiller data was released today and July's median price for an existing home in Portland was down 13.9% from July 2008 at 150.06. (click on any chart to expand it to readable size) This is a significant improvement from the 16.3% decline in May.

The monthly change was up 1.1% from June. This is the third month in a row that the index has increased, which indicates that the $8k tax credit along with the usual summer seasonality might be helping to boost demand and therefore prices. The low interest rates aren't hurting either.

The median Portland home price is now down 19.5% from the peak in July 2007.

I previously predicted that prices would continue to decline through 2009, and I appear to be wrong. But I do believe that prices will stabilize or fall again if the tax credit expires in November given the high unemployment in Oregon and soft economy. Only then will we know if May was the bottom of the market, or if prices will decline again. I certainly don't believe we'll return to growth much higher than 0-4% anytime soon.

HOW PORTLAND PRICES COMPARE TO OTHER MARKETS

The above chart shows growth rates for 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 is doing a little better than Seattle, but note how the price declines in the Bay Area are really starting to slow. The bottom has definitely passed there, and we might have hit bottom here as well. The negative price growth appears to have bottomed out in the Bay Area, but it's too early to tell if prices won't slide again once the tax credit expires and the next wave of foreclosures hit. Thanks to readers for catching that slip.
The above chart shows how Portland is faring compared to other cities. Our maximum price decline is still below average, but will we remain below average?

CURRENT PRICES VS HISTORIC AVERAGE

This chart shows the price index for the past 8 years. I also added a line in pink that represents an average of 5% growth starting in January 2001. You can see that the current price index is now below the 5% average growth line. An over-correction is to be expected, but we are also probably correcting to a more reasonable 3-4% long term growth rate, or about the rate of inflation.

FULL PORTLAND PRICE HISTORY


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, until 2008.

Thanks for your patience during the gap in posting. The family and I were off on a 3 week vacation to Europe, and I'll share a few "fixer" photos of houses if Europe once we settle in again.

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.

Data presented in the Case Shiller spreadsheets are calculated monthly using a three-month moving average and published with a two month lag.


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16 comments:

Anonymous said...

I'm not convinced the SF Bay Area has "definitely" hit bottom. There are tens of thousands of Option ARMs due for reset beginning in 2010, plus banks are holding back a lot of foreclosed homes there until 2010, hoping to get more money. Due to negative amortization in the Option ARMs, a lot of those people won't be able to make their monthly payments. The uptick is due to 1) the tax credit and 2) the need to get housing before school starts. To me, this is just a tiny rise before another fall.

patient renter said...

No way has the bay area hit button, that is for sure.

PDX Outsider said...

You guys are right, I misspoke. It looks like the worst of the declines are over, but if the median price growth doesn't go positive or flat soon, prices will continue to slide. Price growth has been negative for almost 3 years now, to pull out of that in just one year would be a pretty serious turn around.

Thanks for keeping an eye on my jet-lagged thinking!

Chris said...

1) Mortgage rates would be .5% higher if the Fed were not buying mortgages. Mortgage securities, more properly.
2) Why draw a 5% trend line? Should housing prices rise simply because college prices, food, health care, and fuel prices rise? Income and credit is what matters.
3) Some discussion of potential inventory in Portland here: http://matrix.millersamuel.com/wp-content/3q09/Amherst%20Mortgage%20Insight%2009232009.pdf

I don't say any of this to be harsh, much kudos to your blog!

Leigh said...

hmmmmm...buying mortgages? I dream of a day where a bank OWNS the mortgages it creates...would this debacle ever have happened if that was a reality....hmmmmmmmm

Anonymous said...

there are tons of californians moving up here now that the market is moving down there. things are starting to sell left and right in the burbs. the first time buyer tax break helps too. the question is...is it going to keep getting better or drop again this winter?

PDX Outsider said...

What? You should know better than to show up here and make claims without supporting evidence.

Tons of Californian's are moving here? Who? For what jobs? Show me the data.

And sales are up in the burbs? I'll have to check the recent RMLS data.

It's times like this I wish I required registration. This sounds like Realtor spin to me. Care to elaborate on any of it?

Anonymous said...

Most out of state folks I've seen lately are not coming to work here. They are either young dorks who don't fit in wherever it is they come from, They figure they can do something "creative" and ride their bikes.

The other set is the empty nest/full bank account folks that just hang out and talk about how great NY or California is.

Anonymous said...

New numbers are out. Any analysis planned?

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