|| Print ||
|Tuesday, July 16, 2013|
BY EVAN SWANSON | OP-ED CONTRIBUTOR
When a fellow mortgage professional shared with me that one of his customers had recently lost in a bidding war to purchase an older home when a competing buyer offered $35,000 above the $340,000 list price and waived the right to an inspection, I thought I had been transported back to 2006-2007, when multiple offers, escalator clauses and irrational behavior were the norm.
You don’t have to work inside the real estate industry to know just how competitive the housing market currently is. Almost daily, the media is reporting the latest housing data, which confirms that home prices are rising, inventories are low, foreclosures are down and some houses are selling in hours instead of weeks or months.
Indeed, housing has been hot during the first half of 2013. According to the latest reading of the Standard & Poor’s Case-Shiller Home Price Index, values in the Portland Metro region have increased by nearly 13% during the 12 months ending in April. The last time home prices increased by this much on a year-over-year basis was October 2006, and we all remember how that ended.
In case you’re curious, the average year-over-year appreciation rate for the Portland Metro market is 5.22%, according to the Case-Shiller index, which dates back to 1987.
Therefore, the current pace of home price increases is more than two times the historical mean.
The current frenzied pace in the housing market, coupled with the painful memories of the crash from only a few years ago, can leave one wondering if home values are headed for the cliff once again. I do not believe this to be the case — in fact, I believe we’re actually in the midst of a sustainable recovery.
What makes this housing market recovery sustainable are two important facts. First, a much greater proportion of the population in the state of Oregon can actually afford to purchase a home in today’s environment, as opposed to that of 2006-2007. Second, the requirements for obtaining a mortgage are far more significant today than they were at that time.
First off, let’s have a look at affordability. According to John Burns Real Estate Consulting (JBREC), an independent real estate research firm, the percentage of households that can afford to purchase a median price home with a 5% down payment in some of the major Oregon housing markets is far higher today than it was in 2006.
During the previous housing boom, subprime loans, stated income qualification, and zero down payment for investment property purchases were widely available. The loose lending standards opened the floodgates for all sorts of folks to enter the realm of homeownership and investment property acquisition, even when they could not afford to service the debts.
Today, subprime loans are extinct, stated income loans have been essentially banned, and investment property buyers must come up with at least 20% down payment in order to buy a home. (Homes purchased for primary residence can still be purchased with significantly less than 20% down.)
Taken together, the fact that more people can afford homes at the current price level and that mortgage borrowers are being approved for loans in a more thorough manner will result in fewer distressed sales in the future. Therefore, I do not believe we’ll enter the vicious cycle we experienced in the crash where a wave of distressed sales hit the market and brought down prices, which then subsequently encouraged another wave of homeowners to enter into foreclosure, and so on and so forth.
While I do not foresee housing prices falling off a cliff like they did in the post-subprime era, I would also like to make it clear that I do not believe that housing prices will continue to rise at double-digit appreciation rates forever.
So what will slow the pace of price hikes? Over the past 10 weeks, mortgage rates have increased by over 1.00%, the sharpest increase within this short a time period in more than 50 years. So although mortgage rates are still low from a historical perspective, the impact of the rise in rates will affect affordability and weigh on demand in the coming months. In fact, according to the aforementioned JBREC Affordability IndexTM, the Portland housing market is currently very close to what is considered to be fair value, while Salem and Bend remain undervalued.
I suspect that the frenzy we are currently experiencing is temporary and that by Q1 2014 we’ll see housing prices increasing at a pace closer to their historical averages. From that point forward, job growth will play a major factor in the health of the housing market. Here’s to hoping that the next several years will bring sustained growth.
Evan Swanson is a mortgage broker and certified financial planner with Mortgage Trust Inc.
Editor's note: Oregon Business accepts op-ed columns on topics relevant to the state's business community. See op-ed submission guidelines here.
Thursday, April 23, 2015
BY LINDA BAKER
On April 1 I attended a forum at the University of Portland on the sharing economy. The event featured panelists from Lyft and Airbnb, as well as Portland Mayor Charlie Hales. Asked about the impact of tech-driven sharing economy services. Hales said the new business models are reshaping the landscape. “But,” he added, “I don’t pretend to understand how a lot of this [technology] works.”
Friday, May 08, 2015
BY CHRIS NOBLE | PHOTOS BY JASON E. KAPLAN
Hagfish may not have evolved much over the last 300 million years, but their protein-heavy slime promises advances in super-materials.
Wednesday, April 29, 2015
BY JACOB PALMER | DIGITAL NEWS EDITOR
Portland is awash in rideshare options. We ask the head of Flywheel what sets his app apart.
Friday, May 22, 2015
BY AMY MILSHTEIN
Floor plans embrace the great wide open.
Wednesday, April 01, 2015
BY LINDA BAKER
Leaders in Oregon's ag sector gathered this morning in Portland’s Coopers Hall winery/taproom to discuss the role of the region as an export gateway, impediments to exporting products and solutions to containerized shipping challenges.
Monday, April 27, 2015
BY JACOB PALMER AND EILEEN GARVIN
A power lunch at Solstice Wood Fire Cafe & Bar.
Thursday, May 21, 2015
BY JASON NORRIS | GUEST BLOGGER
Uncertainty is a part of doing business, whether in through the lens of investment opportunities and risks or the business of running an enterprise.
|100 Best Green Workplaces in Oregon|
|The Green Paradox|
|Up in the Air|
|Queen of Resilience|
|Report says Intel, Altera deal near|
|DEQ fines Tillamook creamery|
|Pranksters discover iPhone text glitch that shuts down your phone|
|Google: We created $939M in Oregon economic activity last year|
|Information of more than 100K taxpayers breached|
|Media CEOs majority of top-10 highest paid|
|Two protesters chain themselves to Shell ship outside of Bellingham|
Tonkon Torp helps seed sustainability at Gunderson.
Oregon-based Environments helps companies create inspired workspaces. “Simply put, we help companies future-proof their workspaces,” says Chris Corrado, president. Since 1988,Environments has witnessed firsthand the changing landscape of business. Native Portlander and Environments founder Corrado says, “We help our clients navigate the complex realities of the workplace today and plan for their future in a very mindful, strategic way. We think of ourselves as their partners in the process.”
One hundred years ago, the Willamette River might easily have been mistaken for a sewer. Unchecked industrial activity and decades of pollution made it unrecognizable compared to the clean river that now flows north for 187 miles from Eugene through the center of Portland.
Sussman Shank LLP served as lead counsel for both the sale of 9 assisted living, memory care, and independent living campuses in Washington, Oregon, and California to a publicly-traded REIT, and the acquisition of 11 single-tenant net lease properties. This transaction was unique because it included both the sale of licensed senior housing facilities and a complicated 1031 tax deferred exchange transaction.
The Oregon Entrepreneurs Network (OEN) will be presenting its third annual Entrepreneurial Summit on Friday, June 5 at Castaway in Portland, Oregon.
On June 13th Mayor Charlie Hales will attend nonprofit organization Dream Change’s inaugural Love Summit and will introduce one of its keynote speakers, Dan Wieden of Wieden+Kennedy advertising agency.