Forbes: Portland Real Estate Market Ranked 3rd Highest in Nation for Downside Risk

Forbes Magazine recently published "Tomorrow's Real Estate Trouble Spots" and the Portland area market ranks 3rd in the nation on their top 10 list of real estate with severe downside risk going forward. Eugene-Springfield ranks 9th in the nation on the list:

"While metros like Miami, Las Vegas and Los Angeles have gained notoriety for plummeting home prices, it's not those markets that have the most to worry about now. These new housing trouble spots, most of which saw home prices peak after the national average, are set to see major price corrections in the next year. To identify them, Local Market Monitor, a Cary, N.C.-based real estate research firm found the Metropolitan Statistical Areas where it forecast the biggest average-home-price drops in the next 12 months"

As many have noted, Portland was late to the housing bubble party by two years, but it will not avoid the hangover -regardless of the "urban planning" argument tossed around by so many. Even those from the NW interviewed in the Forbes article throw it up like a magic shield that will prevent bad loans from ever defaulting. Hipster influx be damned. Jobs, wages, and real cash flow are all important now that the magic potion of easy real estate loans has vaporized.

The Forbes not so rosy conclusion: Portland's real estate market has another 31% to drop from here, and we will see prices drop 9% in the next 12 months alone. The Eugene-Springfield market has another 21% to decline, and can expect an 8% hair cut in real estate prices over the coming year.

For those who've been paying attention, much of this decline will be predicated by the plethora of Alt-A and Option-ARM loans originated in the NW between 2005 and 2007. The majority of these types of loans have a 5 year reset/recast built into the original mortgage. Expect Portland's market to go from bad to worse between 2010 and 2012 as a result.

Portland RMLS Market Action Report – March 2010

The Regional Multiple Listing Service released the Market Action Report this week and the median sale price for March 2010 was $238,900; this is a 3% decrease from the median sale price for March 2009.

The Portland residential real estate market peaked in August 2007 with a median sale price of $302,000. Prices have now fallen 21% from that peak.

Months of supply (total inventory/monthly sales) sits at 7.8 months compared to the 12.0 months of supply for the same month last year. A balanced market has about 7 months of supply.

The first graph compares the median and average sale price with the months of supply. Click on any graph for a sharper image.

The second graph shows the total supply of homes available for sale. This is simply a calculation of the closed sales for the month multiplied by the months of supply. There are currently 14,032 homes for sale; this is a decrease of 1% from the same month the year before.

The third chart shows closed sales by month. There were 1,799 closed sales during the month; an increase of 52% from the same month the year before.

The fourth chart shows new listings by month. There were 4,987 new listings during the month; an increase of 35.3% from the same month the year before.

The final graph shows how affordable the median priced home is for a family of four. History indicates the ratio is usually between 2.5 and 3.0. Prices would have to fall 12.1% from the current median for the ratio to reach 3.0.

Sales were extremely high in March and the pending sales data indicates April will be another solid month. Most likely the big increase is due to the expanded/extended home buyers credit which expires at the end of April.

June, July and August are traditional high volume months. With no tax credit to stimulate sales we will see if the spring bump falls flat.

Portland Neighborhoods by the Numbers

The Portland Monthly Magazine's April 2010 publication wades squarely into the real estate fiasco in Stumptown with a rather romantically biased look at housing. Most of the exposes and profiled homes/loan owners fall nothing short of hopeful editorializing on how THIS must be the bottom, and NOW is the time to jump back into the market. The water is fine? Really? Regardless, there IS actual value in reading the April 2010 issue.

The neighborhoods by the numbers section holds a wealth of data that is highly informative and entertaining for anyone interested in the real estate game. There are no shortage of examples to poke fun at in the data. Although Happy Valley, Hillside, The Pearl, Lake O, Sunnyside, Forest Park, and Centennial neighborhoods stand out with very interesting 1yr and 5yr price decline trends. Pay close attention to these areas for a taste of what's headed for the entire region.

If anyone has the extra time to put all of this info into a spreadsheet, please send me a copy. It would be really fun to play around and graph some of this data. As presented, it's in Flash format and is not readily selectable for additional analysis.

South Waterfront auction goes for half off

From the Oregonian:

Compared with the prices at the height of the real estate boom, the auction bidders took home condos at an average 50 percent discount.

The John Ross condos were listed for an average of $711,000 during the top of the housing market. They sold Sunday for about $316,000, according to winning bids announced at the auction.

Despite the discounts, the sell-off moves the lender closer to getting the John Ross off its books and to its goal of selling out the 303-unit building by the end of 2010. The auction sales also will reduce the lender's costs for property taxes and insurance. If all the sales close, the auction will have produced $14.8 million in sales.

Multnomah County Defaults Soar

Recent data from the Multnomah County Recorders Office shows notice of defaults growing at an alarming rate as Portland's housing bubble begins its deflationary journey in earnest.

• Defaults from 2008 - 2009 increased 54.7%
  
  
• Defaults for Q1 2010 vs Q4 2009 increased 26.7%
  
  
• YOY defaults for Q1 2009 vs Q1 2010 increased 23.6%
  
  

The actual foreclosure rate has yet to catch up to these numbers as the banks have utilized the suspension of FASB 157 (mark to market accounting) to lie about their balance sheets, book massive ponzi style profits, and pay themselves handsome bonuses.

Many a delinquent loan owner is living payment free until the inevitable occurs. In the end, cold hard cash flow will reign supreme as the reality of stagnant wages fail to service impossible bubble era debts. The shadow inventory of homes headed for the auction block is truly massive.

Even the main stream media is foreshadowing the inevitable, and Bank of America says it will increase an already high amount of monthly foreclosures by a whopping 600% before the end of 2010. If you're holding a bubble era mortgage, I have one simple bit of advice for you:

Sell now or be priced in forever!