|| 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.
Wednesday, August 19, 2015
BY GARY THILL | PHOTOS BY JASON E. KAPLAN
A storied institution climbs down from the ivory tower.
Wednesday, August 19, 2015
BY AMY MILSHTEIN
Training, from the mundane to the sublime, bolsters companies and workers in an uncertain world.
Thursday, September 24, 2015
BY KIM MOORE | RESEARCH EDITOR
The traditional model of sports teams using paid media to get their message across is disappearing as teams look instead to social media to interact with fans.
Tuesday, September 22, 2015
BY JASON NORRIS | CFA
On September 17, the much anticipated Fed decision was delivered and the equity markets haven't liked it.
Wednesday, August 19, 2015
BY LINDA WESTON
In 1996, after a 17-year career in the destination marketing industry, where I gained national standing as the CEO of the Convention & Visitors Association of Lane County, I was recruited by the founders of a new professional basketball league for women. The American Basketball League (ABL) hoped to leverage the success of the 1996 USA women’s national team at the Atlanta Olympics — much like USA Soccer is now leveraging the U.S. Women’s National Team’s victory in the World Cup. The ABL wanted a team in Portland, and they wanted me to be its general manager.
Wednesday, September 30, 2015
BY KIM MOORE
Oregon Business magazine’s seventh annual 100 Best Nonprofits to Work For project attracted more than 150 nonprofits from around the state from a variety of sectors, including social services and environmental advocacy. More than 5,000 employees and volunteers filled out the survey, rating their satisfaction with work environment, mission and goals, career development and learning, benefits and compensation, and management and communications.
Wednesday, August 19, 2015
BY GINA BINOLE
Screening for “culture fit” has become an essential part of the hiring process. But do like-minded employees actually build strong companies — or merely breed consensus culture?
|The List: 100 Best Nonprofits to Work For in Oregon|
|Run, Nick, Run|
|100 Best Nonprofits: Working for equality inside and out|
|One Tough Mayor|
|Keep Pendleton Weird|
|Cream of the Crop|
|Portland State campus security to carry guns|
|Twitter's Steve Jobs?|
|American Apparel files for Ch. 11|
|Hiring report disappoints|
|Phil Knight memoir: Coming spring 2016|
|2 out of 5 millennials pay for their news|
|Oregon's graying workforce|
Wage gaps and workforce shortages are threatening the quality of care and supports to Oregonians with intellectual and developmental disabilities. Who’s caring for those who care for our most vulnerable residents?
Engaging employees and customers along the way.
After first visiting as tourists, entrepreneurs relocate to Oregon and spur economic growth.
Hans N. Hugglerhas joined Lane Powell as an Attorney in the Litigation Practice Group, where he will focus his practice on complex litigation.
Over 300 attendees will gather to learn from 50+ regional leaders pushing the sustainability needle forward. GoGreen Portland offers a distinct platform of bringing people together across industries and sectors to build viable networks and cross-pollinate best practices throughout the regional business community.
Are you planning a meeting, party, gala, fundraiser, holiday party, golf tournament, retirement party, team building or birthday? You won’t want to miss this show to get hundreds of great ideas!