2008 Market Forecast

Today I attended a great seminar at the EcoTrust Building in Portland,  sponsored by Ticor Title and featuring a guest speaker, Jerry Johnson.  The seminar was “2008 Market Forecast”.  Mr. Johnson is a highly respected consultant specializing in local and regional real estate development and land use economics. 

We talked about the present market conditions first. There is a surplus of homes for sale right now (about 25 to 30 percent over last year), and the surplus is continuing to grow.  In 2005 and early 2006 many out of state speculators bought up a lot of our inventory with the intention of hopping on the incredible rising tide of appreciation in the Portland area.  However, many of them waited too long and by the time they had purchased property, our market had ‘crested’ and was beginning to cool.  Many of these investors panicked and started dumping their properties on the market in late August, early September 2006.

At the same time many first time buyers who bought homes within the last few years by utilizing a 100% Adjustable Rate Mortgage, were experiencing their first rate increase.  The first two or three years (depending on which type) of an ARM have the lowest interest rate, and therefore a lower monthly mortgage payment.  So lenders were granting loans to buyers whose income qualified them for a loan, based on those first year payments.  However, when the loans began to adjust up many people were not able to afford the increase and the banks began to see more and more loans going into default.  Lenders and buyers were both banking on the rising tide of real estate values to gain appreciation, which would have allowed a buyer to refinance his home for a lower, 30 year fixed rate loan. 

The combination of speculators trying to unload their properties, and homeowners trying to sell because they could no longer afford the payments on their Adjustable Rate Mortgages, caused a glut in the number of homes for sale.  This is where we are today.  Some of these sellers are financially stressed and eager to sell and so we call this a “Buyers Market” because in negotiating a deal, a buyer today certainly has an advantage.  In fact, many buyers are waiting to see if prices will drop as more sellers get ‘motivated’.

There is much speculation about how long this market condition will continue.  Mr. Johnson’s forecast indicates he thinks things may begin to improve by spring, but that it may take a year or two for appreciation to get back to normal.  I was happy to see his stats on market conditions around the country because we really are in much better shape than most other states.  Although Seattle sales are a little bit stronger than ours right now, we are definitely in better shape than California.  Also of interest, is that homes in the low to mid price ranges do have a shorter market time than homes in the higher (over $500,000) price range.  I just sold a home for a seller this week in the $300,000 price range.  Last year it would have sold in three weeks but this year it took four months.  We were fortunate because presently only about 2 out of 20 homes are selling in less than six months.  Proper pricing and condition were never more important than now.

Portland real estate continues to appreciate even in these tough times.  Not at the same rate as last year of course, but it is still appreciating.  We’re still one of the most desirable states to live in and so our property value will always be there! 

Feel free to email me if you have any questions or comments on this blog.