Housing Authority Selling off Houses

I actually saw one of these houses for sale before I saw this article, "Portland agency plans more low-income housing"

"The Housing Authority of Portland hopes to raise $30 million from the sale of 160 scattered-site homes in Multnomah County and plans to use the proceeds to create more low-income housing.

The sale of the mostly single-family homes started in February, and seven deals have closed. Eventually, the Housing Authority wants to replace each of the units it sells, pay for deferred maintenance at the properties it currently owns and, perhaps, create 175 additional units.

But according to Mike Andrews, the Housing Authority's director of development and community revitalization, "it's clear to us that the $30 million is not enough to accomplish all three goals.""

I can't help but wonder if they see this as the peak of the market, and thus a great time to buy. Or if the timing is jsut coincidence. I do know that the house we looked at was bought for $20k 20 years ago and is now listed at over $300k. Not a bad return for their investment.

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.

17% off - 1420 NW 20th Ave Unit: 501

Thanks to Stephanie for sending in an email about this condo with the note: "Here's a condo in the downtown area. It looks like it sold for $525,300 in April 2006 (per Portland Maps). It's on the market today for $436,999. What's the story on this?" MLS#8018072

That's a 17% decline in one year. Ouch.

It doesn't appear to be a foreclosure, at least I couldn't find it on RealtyTrac.

Based on Portland Maps the property tax jumped from $1890 in 2006 to $6100 in 2007.

Is this a sign that the condo glut is starting to push down prices? I don't know anything about this building, any readers know more?

Portland 41% Overvalued

National City Bank released their quarterly housing analysis on Friday, and Oregon gets top billing. Unfortunately it's not for good reasons.

"Bend, Oregon tops the overvaluation list, at 59%. Miami, at 44% is the largest city at significant risk, while Honolulu, Portland, OR, and Riverside-San Bernardino also exceed the 32% threshold. Los Angeles, Seattle, and Phoenix are notably close to that mark. Another way of measuring the degree of overvaluation is by the share of the total housing market meeting the criterion of overvalued. For example, at its peak in the second quarter of 2006, 20 percent of all housing units in America were in metro areas classified as overvalued. By the fourth quarter of 2007, however, that figure dropped to a modest 4 percent. When looked at in market value terms, overvaluation peaked at 39 percent during the fourth quarter of 2005 and the second quarter of 2006. However, that measure has also fallen dramatically, to just 7 percent during the fourth quarter of 2007. Essentially we have, in a scant six quarters, reversed the overvaluation generated since the last half of 2004."

While Bend gets top honors, Portland isn't far behind, taking the #11 spot (out of 330 metro areas) at 41% overvalued.

Most other markets have corrected fairly quickly, so I would expect Portland to also correct over the next 6-8 quarters.

The full report is located here.

In the words of one blog reader: "Portland has been in denial about the inflated value of housing. This should be the most deafening wake up call yet." I totally agree.

Here's a quick note about their methodology: "Our approach to determining statistically normal house values considers not only house prices and interest rates, but household incomes, population densities and any historical premiums or discounts metropolitan areas have exhibited over time. We examined these factors for 330 metro areas now accounting for 78 percent of all existing housing units in America and 93 percent of all related real estate value, to determine what house prices should be, in this statistical sense."

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?

Housing Bailout Backlash Growing

CNN Money has another article today featuring Patrick Killelea from patrick.net, as well as from stopthehousingbailout.com entitled: "Backlash grows against the housing bailout".

"Why should American taxpayers have to pay to bailout reckless lenders and borrowers?

The website Angryrenter.com, launched just last week, has a vitiation demanding that Congress not pass any bailout programs that reward risky borrowing and lending. To wit: "Let the free market sort it out!""

"A third of the American public rents," Brandon pointed out. "They're saying 'I've been saving for a mortgage for years. I could have jumped in on a subprime loan too. Now I'm going to have to pay for a government bailout.""

And from fellow blogger Patrick Killelea

"Patrick Killelea has been blogging about the housing bubble at Patrick.net for four years from San Francisco, where it takes a not-so-small fortune to buy.

"Bailouts reward bad behavior. I've been diligently saving, denying myself lots of things so I can afford to buy, yet the government is saying we have to keep all these people in their homes," said the Web site programmer and author. "Well, wait a minute! Why can't I spend more than I can afford and have the government bail me out.""

I have added a link to the petition in my blogroll. If you oppose any bailout, please sign their petition.

Unfortunately in this election year (or at any time for that matter) it makes better press to help people "save their house", even when they can't afford that house. The rest of us would be better off with lower prices so more people can afford homes, but our guvmint will likely mess this up as usual. Giving tax breaks to home builders for example, our lobbyists at work! Argh!

Reader Sightings – 1734 SE 34th Ave

1734 SE 34th, MLS #8036153 .

A reader sent in this SE bungalow with the comment: "Seems like hell of a steep price for this home." I'd have to agree.

It sold in Juan 2006 for $335k, then a year later for $584k, a 75% increase in one year. Must have been a heck of a remodel.

It's currently being sold by the bank after a foreclosure repossession. The previous owner was 100% financed and I assume just walked away. I'll be curious to see what the bank gets for it. I hope they cut the lawn.