OCTOBER 2008: AROUND THE STATE
Housing market still hurting
STATEWIDE When it
comes to Oregon’s sluggish Metro housing markets, there
is a painful difference between approaching the bottom and
reaching it.
Ever since Portland home prices crossed into negative
territory in January for the first time since 1987, the big
question has been, where does the plunge end and the rebound
begin? Falling home prices have led some optimists to declare,
as an Oregonian headline did on Aug. 27, that the housing
market is “bottoming out.” But step one to a
rebound would be an up-tick in home sales, and that isn’t
happening. Sales are down more than 30% in Portland, Eugene,
Medford and Bend.
Even with a precipitous drop in new home-building, the
Portland market remains bloated with more than 10 months worth
of inventory and clouded by more than 6,000 uncorrected
subprime mortgages and no-document “liar loans”
that will eventually be re-set or “re-cast,”
bringing higher monthly payments followed by new
foreclosures.
The median home price fell $22,000 over the past year. How
much further does it need to drop to get the market moving
again?
Mark McMullen, a Lake Oswego-based senior economist for
Moody’s Economy, predicts that the Portland market will
bottom out at a median home price of $260,000 midway through
2009, and will remain flat for the remainder of the year before
rebuilding slowly. That would represent a 14% price drop from
the market’s peak of $302,000 in August 2007.
“In the coming months we’ll start to see the
market firm up, and then we’ll see builders who are
forward-looking applying for permits again,” predicts
McMullen. “But it will be a while before the market is
back in shape.”
Tim Duy, a University of Oregon economics professor who
compiles the UO Index of Economic Indicators, thinks prices may
have to drop even lower. “Conditions are still very weak,
and prices remain, on average, too high,” he says.
“Housing prices have swelled beyond what is affordable
for people at most income levels in Oregon. Until that
situation is corrected, I expect the housing market to remain
challenged.”
BEN JACKLET
Have an opinion?
E-mail feedback@oregonbusiness.com
