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.

Lying with statistics

One of our reader's sent in a link to this article on CNNMoney.com, "Home sales rise on biggest-ever price drop".

"The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July."

This comment makes it seem like sales have bottomed out and are starting to rebound. The NAR (and the mainstream media) loves to quote month over month increases and declines, when they should be focused on year-over-year changes.

"Though February's pace beat economists' expectations, sales last month were still down 23.8% from a year earlier. Economists surveyed by Briefing.com expected the report to show existing home sales slowed to an annual pace of 4.86 million.

The median price of a home sold during the month fell 8.2% to $195,900 from $213,500 a year earlier - the largest year-over-year price drop on record. Before the start of the current housing slump, it had been 11 years since prices declined, when compared with the same period a year earlier.

"That's a huge drop in prices, which is how you move the merchandise," said Kasriel.

Sale prices have now fallen 15% from their peak in July 2006, and are down 14% from June 2007, when the most recent steady downturn began. That brings the median price of existing homes sold down to May 2004 levels."

There's the real story. Even though prices have dropped 8.7% from February last year (the largest drop ever recorded), sales are still down almost 24% from last February. That doesn't sound like the merchandise is moving to me.

If you look at the recent chart I posted on sales per month, you'll see that an increase in sales is totally normal for February. (this is Portland data, but I'm sure nationally you see the same trend) That's not news. The fact that sales didn't increase with an 8% decrease in prices? That's news. That means we're far from the end of the slump.

"The report is a sign that the price environment is weaker than the Realtors' most recent forecasts. Though NAR chief economist Lawrence Yun said in a release that a "notable gain" in existing home sales is not expected until the second half of 2008, the Realtors' March forecast called for only a 6.3% decline in housing prices in the first quarter, compared to a year ago. NAR also forecast a median price of $200,500 for the first quarter. Given the current environment, March sales would need a very strong showing, both in median prices and the pace of sales, to reach the Realtors' forecast."

Ouch.