Tuesday, September 27, 2011

Get Ready for the Double Dip Portland

"Compared with July 2010, home prices in Portland have dropped 8.4 percent. That's the third-deepest decline of the 20 cities surveyed in the index."



Source: The Oregonian


So where do we go from here (as if the trend in the graph above wasn't enough)?

The fact that foreclosures were held at bay for much of 2010/2011, and the timing of payment shocks per the chart below will both have severe effects on Portland's housing market going forward. At Portland's peak in 2006/2007 roughly 1/3 of originated loans were either Alt-A or Option-ARM financed. The common sales pitch for such high commission loans at the time from the average McRealtor / McBroker went something like this "You can always refinance to a low fixed rate when you have more equity".

Whoops.

2012 through 2013 will give stumptown a strong taste of what the bottom feels like. It will take at least that long if not longer to clear the delinquent inventory of homes and find firm price footing. Portland spent most of the last 12 months declining ~10% annually. That trend will continue for the immediate future.

Debts which cannot be paid monthly - will never be repaid in full. It's really that simple. The house will end up foreclosed upon and sold to the free market sooner or later. The banks/politicians will drag their heels and kick the can to avoid reality, but the simple cash flow math does not lie. Home prices in Portland will continue to decline for at least another year, if not several years.





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