Playing Case-Shiller To Your Benefit

Posted on 01/4/09 9:51 PM

Portland’s year-over-year home prices decline more than 10%

For the first time since the housing bubble burst, the year-over-year decline in value for residential property in Portland is in the double-digit range. According to the S&P Case-Shiller Index, arguably the nation’s most recognized source for home price changes, Portland homes lost more than 10% since October 2007.

Close-in Neighborhoods Typically Not Hit As Hard

The Case-Shiller statistic reflects developments for the Portland-Vancouver-Metro Area. Not all Portland neighborhoods have suffered a 10% loss. Losses in several close-in neighborhoods have remained in the single-digit range, some have even posted mild gains. Here’s an overview of price developments for selected east-side zip codes based on the Median Sale Price for Q4/2007 vs. Q4/2008, excluding condo bulk sales. Disclaimer: comparing median sales prices constitutes a different approach from Case-Shiller, and thus does not accommodate a true apples to apples comparison, but it does provide a rough indication.

Year-over-Year Median Price Changes For Selected Zip Codes

Significant deviations from the neighborhood-norm not uncommon

Even within a neighborhood, home price changes can differ significantly. Depending on seller circumstances some home prices may drop considerably, when others remain flat. A seller seeking to avert foreclosure, for instance, will frequently reduce the price another 20k in a short period of time. As a result, the value of some homes will reflect a 10-20% year-over-year drop, when the neighborhood only dropped by 4-5%. The home itself is often just as good as the next – in relative terms.

Here’s an example of an eastside home where the price point is substantially lower than what it “should” be:

This 2,300 SF Belmont home features 4 bedrooms, 3 baths, an entertainer’s kitchen and a deck + yard. It has three floors of finished space. The lower level is entirely suitable as a guest quarter/home office. It sold in October 2006 for 465k and is now listed at 399k 375k. You’d be hard pressed to find a home trading at $170/SF in this neighborhood, let alone this kind of quality. If it sells at 399k 375k, this would mark a 14% 19% drop (over two years) in a neighborhood that dropped a mere 3-4% (up some in 07, down some in 08).