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.”
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