Portland’s Bank-Owned Inventory Clouds Recovery
Recovery For Portland’s Housing Market Thwarted?
For a brief moment at the outset of 2010 it looked like Portland’s housing market was on track to recovery. Home prices and sales leveled off and began climbing in select sub-markets. Several condo developments, notably Atwater Place recorded a record number of sales during the first quarter. Supported by a generous tax credit and mortgage rates held at an all-time low by Federal Reserve purchases, Portland’s housing market seemed set for stability, if not a new boom in activity.
A glance at the latest Case Shiller numbers, however, suggests that the good times have come to an end, for the time being at least. Home prices in Portland have once again resumed their decline and are down almost 4% year-to-date (based on Case Shiller). The last time the index was this low was April of 2005. Granted, we’re heading into real estate’s busiest period of the year, and an improved economic outlook is likely to spur demand for homes in Portland. Still, a significant obstacle to a sustainable recovery looms over Portland’s real estate market: foreclosures!
Share of Foreclosed Homes Higher Now Than A Year Ago
The government’s home-loan-modification programs have helped keep a relatively small amount of home owners out of foreclosure. But more repossessed homes are now starting to land on the market, driving up the number of houses for sale and putting pressure on prices of homes for sale in Portland. In the first quarter of 2010, roughly 20% of all homes for sold were bank-owned. A year ago the quarterly average was well below 15%.
The majority of foreclosed homes that sell in Portland these days go for less than 150k. Most are located on Portland’s eastside along the I-205 corridor or in North Portland. In recent times only about 10% of Portland’s bank-owned sales are properties priced at 300k and higher. A mere handful of foreclosed West Hills luxury homes and high-end downtown condos sold in the last three months – notably a 5,000 SQFT home in Portland Heights that sold for 200k less than asking.
Click here for more details on foreclosed West Hills luxury homes and high-end downtown condos sold over the last three months. Link active for 14 days as of 5/27/2010
Clouds Expected To Lift In 2011
Short-term the outlook is not very favorable; it will take a while for the market to work through the current foreclosure inventory, and loan delinquencies remain high - problems with FHA loans in particular have increased substantially. In addition, an increasing number of option-ARM borrowers will likely have to deal with higher payments as these loans re-set in the months to come. Many people had also expected interest rates to climb as the Federal Reserve began to withdraw from mortgage markets, further dampening the prospects for a housing recovery.
The opposite has occurred; mortgage rates have fallen to their lowest point in a year and are expected to continue to drop through the summer. Low interest rates by themselves won’t be enough to counteract the impact of delinquencies on housing prices, but they may be just one of several surprises that lie ahead and end up shifting the course of events. On that note…a recent study of 92 economists by financial-products firm MacroMarkets found that on average housing prices are expected to drop slightly in 2010 and begin rising again next year. That means that for the first time in years someone who buys a house this spring will most likely see their home appreciate in the next year. And rising housing prices, just like falling ones, tend to feed on themselves.
