Portland Existing Home Prices Drop 14.4% in February (updated with analysis) - Case Shiller

The February Case Shiller data was released yesterday and February's median price for an existing home in Portland was down 14.4% from February 2008. (click on any chart to expand it to readable size)

The monthly change was slightly better this month, only down 1.9% from January as compared to the 3% drop from December to January.

The median Portland home price is now down 19.1% from the peak in July 2007.


The chart above shows the price index for the past three years. You can clearly see that prices have now dropped well past the prices seen 3 years ago, and have hit levels not seen since July 2005.

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 and Seattle are tracking each other very closely, still about a year behind the rest of the market.

While the price index continues to fall everywhere, the growth rate (or decline rate) for the 20-City index as well as for the San Francisco Bay Area markets appears to have reached an inflection point. We need a few more months of data before calling it a trend, but it looks like there are signs of a bottom approaching for the Bay Area as well as the rest of the country.

February is the first month where the price decline didn't set a new record for the SF Bay Area and for the overall 20 city index.

This chart shows the price index for the past 8 years. I also added a line in pink this month 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.



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. But as they say, past performance is no guarantee of future performance!

What else would you guys like to see? Any predictions on when/where we'll see the price bottom?

Please feel free to distribute these charts as long as you leave the footer!

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.

Portland Existing Home Prices Drop 14.4% in February - Case Shiller

The Case Shiller data was released this morning, and Portland prices fell 14.4% in February, down 1.9% from January.

Full details and charts will be released later today Wednesday (work has been busy) when I get a break.

Portland Home Prices Drop 11.5% in November

The November Case Shiller data was released this morning and November's median price for an existing home in Portland was down 11.5% year over year. (click on any chart to expand it to readable size)

The monthly change was even worse, down 2.3% from October, the largest drop we've seen to date. Or ever.

While the other markets seem to be stabilizing Portland prices seems to be accelerating in the wrong direction. Recent news of layoffs at OHSU, Intel and others certainly won't help the picture either, adding another layer to the cake of misery which includes increasing foreclosures, lack or credit, and ARM mortgages resetting.


The chart above shows the price index for the past three years. You can clearly see that prices have now dropped to 2005 levels and continue to fall. Pop.

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 very closely, still about a year behind the rest of the market. The 20 city index started to flatten out a few months ago and it looks like the San Francisco Bay area has also started to slow down. We'll need a few more months of data before calling it a trend, but maybe prices have dropped enough for the scavengers to snap up foreclosures and prop up prices.

For comparison, the San Francisco market is down 30.8% in November, but was down 31.1.% in October. It looks like things might be stabilizing a bit down there.

Seattle also saw a massive drop in November, dropping 2.5% from October, and down 11.2% from last year.

This chart shows the price index for the past 8 years. I also added a line (the light grey line) that represents 5% growth starting in September 2000. You can see that the current price index is still above the 5% growth line, indicating that we have a ways to go before prices fall back in line with historic averages.

Proving once again that the only constant with forecasts is the ability to be wrong, just 2 months ago I predicted that prices wouldn't be back to historic norms until late 2009. It now looks like we'll be back at the historic trend line by April 2009. I doubt things will stabilize there however, as the recession just seems to be picking up steam at this point. If we assume Portland will react like the rest of the market we're looking at price declines throughout 2009. However as the NAR likes to remind us all real estate is local, so if our economy is doing worse than the rest of the nation look for prices to continue to fall into 2010.



This chart is more for historical curiosity than anything. It 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. But as they say, past performance is no guarantee of future performance!

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.

235 NE 94TH AVE - 44% off in 2 years

This poor little house (RMLS# 9000296) lost 44% of its value in under 2 years. Bought for $232k in March 2007 (a few months before the peak) by an investor, it's not on the market for about what it sold for in 1999.

"Bought in 2007 for $232k and priced to sell fast! Mins to I-205 & I-84, max line & Mall 205shops. Updated kitchen, fenced private yard. Great first time home or investment."

The reader who send this in commented: "given its location and condition, it's probably still overpriced".

Given that it's in the shadows of I-205, he might just be right. I can't imagine what has caused the owner to lose that much value in that short a time.

Portland Existing Home Prices Drop 8.6% in September - Case Shiller

The median price of existing homes in the metro Portland area fell 8.6 % year over year in September 2008 according to Case Shiller, continuing the trend that began in July 2007. This is now down 9.0% from the peak in July 2007, wiping out any gains made since March 2006.

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

I will post the charts later today. Stay tuned!

Portland Median Existing Home Prices Slip Again - Down 6.6% YoY (Case Shiller)

The median price of existing homes in the metro Portland area fell 6.6% year over year in July 2008 according to Case Shiller, continuing the trend that began in July 2007. This is down 6.6% from the peak in July 2007. The month over month declines are also accelerating, as the index dropped 0.5% from June to July 08, vs. 0.3% from May to June.

I'll post the charts later today.

Watch out for that falling price! 3014 SW Iowa St.

This interesting little house (3014 SW Iowa St, RMLS #8039912) is now on the market for $255k, down from $335k. Why they didn't just go to $250k and catch the folks who are searching up to $250k is beyond me. But hey, if they had to drop the price 24%, they might not be so good at this whole pricing thing to begin with.

I also find it interesting that it's not a featured property on the listing agent's site. Are they embarrassed by it?

Portland Existing Home Prices Drop 4% in March

The median price of existing homes in the metro Portland area fell 4% year over year in March 2008 according to Case Shiller, continuing the trend that began in July 2007. This is down 6.5% from the peak in July 2007.

The chart above clearly shows the bubble deflating, and also shows a bit of a plateau over the winter as sales slowed and seller's held out that prices would rebound in the spring. Prices have clearly started accelerating downwards as the fundamental issues driving the price declines (lack of financing for buyer's with poor credit or low down-payments, prices vs. income ratios out of whack, too much inventory, etc) have not changed.

The price index has fallen to 174.39, less than the point in May 2006 (175.20).

Prices in Seattle and Portland are still following the national trend with a one year delay, as the previous chart above shows. National price declines show no signs of slowing, which indicates that Portland is likely in for the same ride.

ABOUT CASE SHILLER:
The Case Shiller data focuses on the change in price of existing homes, and tries to exclude the effects of remodeling, or major damage. It tries to exclude investment properties and foreclosures (which would make the data look worse) as well as transfers between family members. It's a much better indicator of how the price of the average or typical house has changed from year to year. For full details on their methodology see their factsheet.

Portland Existing Home Prices Drop 4% in April - Case Shiller

Prices of existing Portland homes dropped 4% year over year in April according to Case Shiller, down an additional 1% from March. Prices have rolled back to the same level as May 2006, wiping out almost 2 years of gains.

More data later today once I have a chance to update the spreadsheets.

Who Are the Speculators?

My wife and I hit on an interesting theory this weekend, as we were looking at yet another Realtor used houses salesperson-owned property featured above(MLS #8051133, 3807 N. Borthwick Ave.).

I believe that more and more Realtor agent-owned investment properties are going to go on the market to raise cash, as the typical Realtor used house salesperson's income has been slashed by 40%

This property just came on the market while still being renovated. We did a quick drive by and noticed the massive amounts of peeling paint, the inch of moss on the roof, and my wife commented that the front porch looks like it's about to fall off. At first I was surprised to see it was owned by a Realtor agent, but then it started to make sense.

The gravy train is over. Lots of Realtor used houses salespeople bought income properties over the past few years during the years of double-digit appreciation. Now that sales are off 40% I imagine a number of them must be hurting for income. Hence they are selling off the investment properties to raise cash. And I assume they need cash badly enough to not even invest a little effort into curb appeal before trying to sell it.

The irony of course is that the more Realtor used houses salespeople that start dumping properties, the more it's going to drive the market down, continuing the cycle. I don't have facts to prove that more investment properties are on the market than usual, but based on our looking it feels like there are.

This is yet another sign that things are going to get a lot worse before they get better.

California Speculator Loses 9 Houses

Will sent this one in:

"You may have already caught this one...

http://www.reuters.com/article/bondsNews/idUSN0952458820080511?sp=true

I thought I'd send it along in case it slipped by. I don't think too many people will be losing sleep over this guys loss."

From the article:

"LOS ANGELES (Reuters) - A California man who has defaulted on nine homes and expects banks to foreclose on all of them, forcing him into bankruptcy, says he now considers it a mistake to have invested in the real estate market.

Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience.

...

Forgaard bought a house in Santa Cruz, about 60 miles (100 km) south of San Francisco, in 2000. Four years later, using $800,000 in stock options, he began snapping up investment properties, putting 10 percent to 40 percent down on negative amortization loans -- in which payments do not cover the interest so that a borrower's balance grows over time."

I gotta give this guy credit, he actually takes responsibility for his mistake. He knew he was speculating and got burned.

"I knew I was sitting on time bombs," Forgaard said. "I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.

"I didn't anticipate a downturn of epic proportions such that home values are 40 percent less than they were," he said.

"Where I went wrong is I invested heavily in an area that wasn't my passion and I had a really demanding full-time job so I couldn't pay attention to nuances, the little indicators telling you the housing market was going soft," he said. "I was in over my head."

Money magazine predicts a 20% price drop for Portland

A reader sent this in, from Money magazine:


They are only predicting a 10% drop for Seattle, so it seems like they think that Portland was either more overvalued, or is facing some condition that will cause it to fall further (lack of jobs?).

I tend to agree with the 20% drop, that's about what I've been predicting. Any other thoughts? Should we start a pool?

Portland Home Prices Continue Falling - Case Shiller

The median price of existing homes in Portland declined 2.0% from February 2007 to February 2008 according to the S&P / Case Shiller Home Price Index, continuing the trend that started in April 2006 when price growth peaked, and increasing the decline that started in January. The median price declined 1.4% from January. None of this is surprising given the record high inventory levels, 40% drop in sales, and tightening of the credit markets.

The chart also shows what looks to be a small plateau at the end of last year. This is likely due to the seasonally slow months, and seller holding out for better pricing in the spring. When that didn't materialize buyer's relented and dropped their price.

The median price of existing homes in Portland is now lower than it was in June 2006, wiping out over a year and a half of appreciation.

This chart shows the median price over the past three years, making it easier to see the comparison to April 2006.

Nationally, the 20 city index declined 12.7% in February and shows no signs of slowing. While prices in other regions around the nation are well on the way towards correcting (see the recent National City report), Portland is just beginning its correction.

My advice for sellers? Look at where similar houses were selling in the Spring of 2006 (not 2007) and price 5-10% below that, or else you risk following the market down even further.

My advice for buyers? Look at where prices were in the Spring of 2006, and offer 5-10% below that. Or just wait, those prices will be here soon enough.

ABOUT CASE SHILLER:
The Case Shiller data focuses on the change in price of existing homes, and tries to exclude the effects of remodeling, or major damage. It tries to exclude investment properties and foreclosures (which would make the data look worse) as well as transfers between family members. It's a much better indicator of how the price of the average or typical house has changed from year to year. For full details on their methodology see their factsheet.

Are Relistings Inflating Values?

I noticed another house get relisted today. This house was listed today (MLS #8039896) at $299k, down from it's previous listing at $314k (MLS #8035485).

Let's assume it sells at the lower price. The spread between listing and asking price will show as 0. But if it had remained at $314k and just the price reduced the spread would be 6%.

So for those trying to chart the spread between listing and selling price as an indicator of where the market is moving, we now have another skewed statistic.

I haven't had a lot of time to think this through, so what are your thoughts? Is this meaningful? Any Realtors care to comment?

Reader Sightings: 5838 NE 14th

Here's another reader sighting:

12 SW Lowell, MLS #8003377

"Bought in 2004 for $380K, now selling for $300K. That’s a 21% decrease!"

My favorite quote: "No Yard to Maintain!" It's like a condo, but it's not!

Here is a link to more data on Trulia.

So who can find the largest price decrease out there? I think I'm in the lead with 45%, I'll have to go check. Post them in the comments, or send me an email and I'll post them up.

I'm also happy to post the biggest increases, coming soon!

Free Fall Friday - All of Portland?

At least one Realtor blog is now predicting a decline in prices for the Portland metro area in March. "Portland Home Prices Finally Fall in March"

I have some doubts about his methodology, but I give them props for going on record as predicting a decline, and I imagine they will soon be run out of town by the Portland NAR.

Free Fall Friday - 4340 SE Madison

Here's another house with an interesting history. 4340 SE Madison.

The house sold for $305k in February 2006. It then sold again for $541 in June 2006 (with 100% financing!), a gain of 77% in just 4 months. It went into foreclosure and was bought back by the bank for $355k in October. Last month it sold to the proud new owner's for $295k. That's 45% off it's high!

Unfortunately the property taxes adjusted upwards to reflect the new $541k price, jumping from $2858 to $4373 in 2007. Ouch.

I don't have insights into what happened along the way, but judging by the state of the pool it was likely vacant for a period of time. Any Realtors out there know the details of any of the recent sales?

I also start to question Zillow's methodology with cases like this. If you look at their home value chart (you'll need to click on the 5 year view for the best picture) it was quick to reset upwards with the sale in June 06, but hasn't come back down to reflect the recent sale price. And after all the best indicator of what something is worth is what someone else will pay for it, in this case $295k, not $496k.

What's that smell you ask? Something between fishy and fraud methinks.

33% off in Irvington - 2817 NE 24th Ave.

I stumbled across this bungalow this weekend, which is currently offered "subject to a short sale" at $450k, down from the previous selling price of $675k.

MLS ID# 7092039

Any tips from those in the know?

Sidelined Home Buyers Frozen by Fears

I caught this article today: Sidelined home buyers frozen by fears.

There are a couple great quotes that sum up the current lack of buyers:

"Rochelle Getzler, a housewife in Nassau County, outside New York city, and her husband, Abraham, have been on the fence for nearly a year, waiting for an opportune time to buy.I think it is too risky to buy right now," she said. "Yes, prices have come down, but they have come down from extremely high levels."

""I think home prices are going to continue falling, so I see no compelling reason to buy a home right now when we can hold off and buy at a lower price later this year or early next year," she said.

Economists tend to agree. Housing markets in some parts of the country will suffer drops of more than 30 percent before the housing crisis is over, according to a report in December by Moody's Economy.com."

""The economic fundamentals in housing are weak and I see no sign of a bottom," said Chris Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School in New York."

These quotes all pretty much sum up my current position for buyers. I see two strategies to play:

1. Offer X% lower than current asking prices, X being wherever you see the market bottoming out in the next 2-3 years.
2 Wait for signs that prices have stabilized, and might increase again, and start making offers then

Has anybody made any offers recently that were > 20% off asking price, and had them accepted?

A Local Anecdote

We had some good friends over for drinks this weekend and, as usual, talk turned to real estate. We mentioned that we’ve had our eye on a house that is currentlyfor sale in their neighborhood, and not only did they know the house, they knew a bit about the owner. Their comments were:

"That house is owned by Mary (not her real name). She made a bunch of money as a mortgage broker and bought six investment properties over the past few years. Her income has dropped recently and so she's trying to thin out her holdings and she listed that house a few months ago. Her original plan was to fix it up to get top dollar, but now she's just hoping to get out from under it fast. She's already dropped the asking price once, and will probably drop it again."

I can't help but think we're going to see more and more stories like this over the next few months (and years). If you were a buyer interested in this house, what would you do? Wait? Submit a lowball offer?