Monday, February 15, 2010

Oregon Housing Prices Converge

The January 2010 "Trends in Delinquencies and Foreclosures in Oregon" report from the Federal Reserve Bank of San Francisco was recently released to the public. Of particular interest, is a graph depicting four of Oregon's major housing markets price indexed for the last decade. As you can see below, after 10 years of varying growth rates, Oregon's home prices are once again converging back toward a common historical point of reference -regardless of where you live in the state.

Source: Federal Reserve Bank of San Francisco

The report also finds that Oregon home prices were largely spared from the subprime carnage -unlike our neighbors to the South and in the South West. Home prices in Oregon are significantly higher than the rest of the country at this time, although that was certainly not the case for at least half of the last decade.

Source: Federal Reserve Bank of San Francisco

The report paints a rather dark picture for Oregon employment when compared to the rest of the country. Worse, the graph detailing the entrenchment of Alt-A / Option-ARM loans in Oregon ominously shows that we are in fact not "different" this time. Although Oregon avoided the subprime wave, it is right in line with the rest of the country for Alt-A / Option-ARM loans outstanding. In most cases these types of loans are headed for reset / recast from 2010-2012.

Source: Federal Reserve Bank of San Francisco

Oregon has about half as many Jumbo loans outstanding when compared with rest of the country, and one can expect that the Portland market has the majority of these types loans in the state. This phenomenon may adversely effect Portland's higher end prices as incomes remain stagnant and credit tightens -especially for Jumbo loans. However for the State of Oregon outside of Portland, the Jumbo market should not be a significant source of risk with respect to price compression in lower sectors of the housing market.

I plan to provide newly published data from this report as it becomes available from the Federal Reserve Bank of San Francisco. The full report can be found here in .pdf format. The first half of the report is national in scope, while the second half (starting on page 13) focuses exclusively on Oregon -complete with foreclosure trends and foreclosure heat maps for the entire state. The commentary is exactly what you'd expect from a Federal Reserve Bank, however the data and graphs are well worth the 30 page read.