Condo Sales Stall Like an Old Plymouth

According to a recent article, "Condo pipeline dries up" in The Portland Business Journal, sales of new condo's in Portland have come to a screeching halt.

"The John Ross condominiums have sweeping views, an elegant shape that inspires architectural envy, and a whole lot of unsold units.

To date, just 177 of its 303 units have attracted buyers.

According to Multnomah County property records, a database that includes sale dates along with information about the property, buyers and prices, just two units have sold in 2008."

Only 2 units have sold in 5 months? At that rate I'll be dead before they sell the rest.

According to the article, there are over 3 years of inventory for condo's at the current sales rate.

"Today, Portland has about 2,500 unsold condominiums, a figure that includes developers' inventories and another 1,000 "phantom units," which refers to condominiums bought by investors who intended to turn a quick profit and who apparently are holding out for the market to return.

Assuming Portland buyers have an appetite for 700 to 1,000 units a year, it will take nearly three years to clear out the current inventory."

I'm still amazed that the construction industry hasn't found better ways to predict when the market is going to slowdown or pickup. It seems like it's always feast of famine. Develop thousands of new units, flood the market, stop construction, then miss the bottom and scramble to build more.

""We probably have about a two-year supply in the downtown area," said Newton, who said barring an economic collapse, Portland continues to attract newcomers and will need to keep adding new housing in the future."

Yes yes, we know so many people are moving here. With a soft economy I'm not sure where these jobs are coming from. I'll post the migration statistics when I find them again.

But if you're in the market for a condo (and I know a few readers are) it should be a great time to negotiate. And will likely only get better until the inventory drops, either from increased sales, or conversions to apartments.

Portland Gentrification Makes NY Times

My wife found this article on the front page of the New York Times today, under the Portland Journal section. "Racial Shift in a Progressive City Spurs Talks".

"PORTLAND, Ore. — Not every neighborhood in this city is one of those Northwest destinations where passion for espresso, the environment and plenty of exercise define the cultural common ground. A few places are still described as frontiers, where pioneers move because prices are relatively reasonable, the location is convenient and, they say, they “want the diversity.”

Yet one person’s frontier, it turns out, is often another’s front porch. It has been true across the country: gentrification, which increases housing prices and tension, sometimes has racial overtones and can seem like a dirty word. Now Portland is encouraging black and white residents to talk about it, but even here in Sincere City, the conversation has been difficult."

While it's obvious that the NE has changed, we missed the beginning of the change. We decided to rent a house in the NE as it was a less-expensive neighborhood, relatively convenient to downtown and also convenient to my job in Vancouver.

As we drove around looking for places to rent, some of the first things we heard were a blatantly racist real estate agent encouraging us not to live in certain areas of the NE (near Killingsworth), and our movers who told us "when we saw your address we were afraid to come out here."

I'll leave you to read the full article if you're interested, but this comment struck me as disingenuous.

"Ms. Laufer offended some, but she said in an interview a few days later that she had meant well, that she felt enlightened by what she heard at the meeting and hoped to be able to discuss her feelings about race honestly with blacks. Unlike some other whites new to the area, she was not aware of the city’s history when she moved there. The price was right, that is all, and Mrs. Laufer loved the front porch."

I find it hard to believe that nobody told her the history of the NE, we learned about it without even asking. And just looking around it's pretty obvious what's going on.

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.

Ruffling a Few Feathers

Apparently I have ruffled a few feathers over on Trulia when I asked if their heatmap data was based on RMLS (inflated) figures, or on assessor data (more accurate IMO).

The thread is here if you'd care to join in.

Frankly I'm tired of having to keep portlandmaps.com up whenever I see a house listing, to get the true picture of the size of the house. I heard from a Realtor that RMLS requires Realtors to input the total size of a house (including unfinished basements and attics) not just livable space.

I realize that the assessor data can be wrong, but I feel that it's more accurate than the size data that RMLS posts. I'd like to see them change this policy, what do you think?

Those Crazy Realtors

A local real estate agent (who shall remain nameless) recently sent a friend this Op-ed piece from the Wall Street Journal. along with this comment:

"Here is an interesting article I thought you might enjoy. It is a bit wordy but very good national information about the real estate market. Remember, the article is referring to our market nationally.

Oregon real estate is still relatively strong!"

Wow. 2 pages is wordy? Are her clients illiterate on average?

I also love that this piece really refers to the national market, and specifically talks about new housing starts, neither of which really apply to Oregon or Portland specifically.

But my favorite is the last line. If relatively strong means we've only dropped 7% when the rest of the country has dropped 10% or more, then yes, we're relatively strong.

It must be exhausting staying that optomistic all the time!