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?
17 comments:
In some areas it is already down 20% (Happy Valley, Vantucky, Gresham, Sandy).
Note that it is based on a $306,000 peak median price and we are already down to around $275,000 (or will be when April numbers come out). There's your 10%. As long as inventory (in terms of units) continues to rise we can expected the correction in terms of prices to continue.
Thank you for posting. Good information to have.
Great Post.
It will be fantastic if it continues to drop even during the "peak" buying seasons. I know several homeowners who are talking about only dropping their price come mid autumn. They are hoping to still get near their asking through the summer.
Sour grapes on my part? I think not. I want to get the best home I can afford at the best price. As long as prices continue to fall better and better properties are gradually find their way into my sphere of affordability.
Sure I want to own a home and would rather be building equity than paying rent. I'd rather have the NY Steak at VQ's than at Stanfords but some people can only afford what they can afford.
I'm toying with the idea of buying land and building from scratch. How does the cost of dropping home prices effect the price of undeveloped land and the price of hiring contractors to build the home? Any thoughts?
Most bubble markets that crashed 2007 (so cal, vegas, florida etc) show around $200,000 loss. Million and up homes well over $200,000 loss. Sellers...I suggest you aggressively lower your price now or you will be sitting on your house for well over a year. I am not buying until sometime next year. I love seeing all of the for sale signs popping up in Lake Oswego!
The problem is a lot of folks are upside down due to their goofy loans, ie, interest only, option ARM, etc or pulled all the equity to finance a lifestyle thus CAN'T lower their prices without it being a short sale.
Yes, it is a tough position to be in. Many years ago when I was young and foolish I was duped into buying a mobile home. "don't rent" they told me "build equity then sell it in a year or two and you'll have the money for a down payment" to make a long story short when the time came to sell the property management that owned the land evicted me as they were rezoning as a 50 plus community. I had already moved to Arizona to start school and I couldn't afford to pay the difference. I had to move my trailer to a friends used car lot.I spent the next 8 paying off enough equity to sell it for half of what I paid. It sucked but it was my own fault.
Look at the median income. Concerning market fundamentals, that income level can only support a certain price in housing. Obviously the median price still has a way to go to become affordable.
^^ @ miturn:
Correct me if I'm wrong, but that median income level can comfortably support that median house price.
$306K X .80 = $245K
At ~6% @ 360 months, that's about $1850 per month, or about $22K per year in house payments.
Divide that $22K by the median gross family income of ~64K, and you get 34%. That seems healthy and sustainable to me.
Of course, those are median numbers, but they're both median numbers. And of course, most speculators don't have 20% to put down, and that will have a welcome effect on the quality of neighborhoods, IMO. But most families looking to owner-occupy will have some down payment, and even at zero down, the ratio is only .43 (which is tolerable by most banks if the borrower has good credit).
Am I missing something? Is the median income going to go down drastically, too?
Anonymous,
I was just going by the old rule of thumb that the cost of a home should not exceed 2.5x a persons annual income. Otherwise, it becomes unaffordable.
Sure, a person can always work out the numbers (rationalize them) in order to justify spending too much on a home, but look around you and see what happens. Simply put, houses are too expensive in the Portland area and need to come down.
But then, maybe I don't understand the new paradigm. It is a great time to buy!
Anon @ 10:16,
I'm curious...grape or tropical punch?
$306K X .80 = $245K
Your use of a 20% DP is a farse. Also a typical loan includes PMI and scandalous fees. Another variable you neglect to consider is DTI and property taxes.
and even at zero down, the ratio is only .43 (which is tolerable by most banks if the borrower has good credit).
0.43 is tolerable by banks that are either BK or about to be.
I'm not quite sure I believe their take on Salem only dropping 3.6% this year. Not when I've seen plenty of homes in the 250-350k market (300+ especially) already drop 5-10% off peak prices from last year.
a car should not exceed 2.5 your annual income. a house should not exceed 25x your annual income. that is the golden rule and rule of thumb they taught us in Realtor school.
2.5 x 40k = $90k. I don't think someone earning $3300 / month should be driving a new Porsche - but I'm kind of frugal like that. :)
On that same token $40k x 25 = $1,000,000.
That would also be a lot of home, especially with the payments on the Porsche.
"a car should not exceed 2.5 your annual income. a house should not exceed 25x your annual income. that is the golden rule and rule of thumb they taught us in Realtor school."
Please tell me this is a joke, it's late and my sarcasm sensors are down.
I've always heard you shouldn't buy a HOUSE for more than 2.5-3x your income, not sure about a car. I try not to pay more than .1 times my income for mine. :)
I am pretty sure the comment was a joke--it gave me a good chuckle. The writer probably multiplied both numbers by 10, then threw in the realtor part to lock in the sarcasm. A car should be no more than 0.25 times your annual income, implying a $10K car on a salary of $40K. A home should be no more than 2.5 times your income.
Five New Rules for Home Buyers:
Rule 1: You can't time the bottom
Rule 2: One reason to buy now - mortgage rates
Rule 3: Another reason to buy - rates on big mortgages
Rule 4: Don't buy cheap; buy good schools
Rule 5: Make sure your agent has your interest at heart
From a Realtor - NOT - from today's Monry Magazine:
http://money.cnn.com/2008/05/01/real_estate/new_rules.moneymag/index.htm?postversion=2008051205
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