Portland's housing market lamblike as springtime nears

The median price for metro-area homes is up about 12 percent
Wednesday, February 21, 2007
(as published in the Oregonian)

As the all-important spring selling season approaches, Portland's housing market continues to show signs of slackening.
The median home price in the Portland metropolitan area was $275,000 in January, according to figures released Tuesday by the Regional Multiple Listing Service.
That's up nearly 12 percent compared with January 2006. But home prices have essentially been flat since late spring, and have even come down a hair since their peak in June, when the market was gyrating upward and the area's median price hit $280,000.
New listings were up 19 percent in January compared with the same period last year, and closed sales were down 9 percent. Consequently, the inventory of homes for sale in the region hit a 6.2 month supply in January -- its highest level in five years. The average market time for a home sale was 65 days, up from 44 days in January 2006.

The softening trend mirrors the story nationwide, though the region's market remains relatively stronger than almost all other areas of the country. By historical standards, it is still quite healthy and continues to benefit from a strong regional economy and low interest rates.
"It's the thing we expected, transitioning from a seller's to a buyer's market," said Jerry Johnson of Johnson Gardner, a Portland economic consulting firm. "If this is as bad as it gets, we can live with that."

While median home prices still show strong growth year over year, Johnson thinks those comparisons will get tougher as spring wears on. For the year, he thinks the Portland area will do well to see prices hold at current levels, a soft landing that will look positively muscular compared with some metropolitan areas around the country. Still, Johnson cautions, "There's no way we're replicating the first six months of 2006 in the first six months of 2007."

Don't tell that to area home builders and real estate agents, who are still sounding a boosterish note as they head into home sales prime time. Many of them blame the media for spreading doom-and-gloom stories that have scared away buyers, and say there's plenty of pent-up demand that will fuel sales this year. "In reality, the market is still incredible -- it's not like we're Las Vegas or Arizona, where we can continue to build into the desert," said Rob Young, a broker in Clackamas County.

Yet RMLS statistics and anecdotal accounts suggest that Clackamas County -- specifically Happy Valley -- is one of the weakest pockets in the metro area precisely because there is so much new building going on. The average time on the market in Clackamas County was 84 days, compared with the metro average of 65 days. "I'm signing off on the same number of deals in this office," Young said. "I don't see a difference."

Likewise, Brian Bellairs, an agent with The Meadows Group in Beaverton, says he senses a decent equilibrium in the market, with some recent signs that activity is heating up.
"We don't know how hot it's going to be, but we think there are more buyers in the marketplace," Bellairs said.

Arbor Custom Homes, one of the area's largest home builders, said its sold a record 95 homes in January, following its record of 67 home sales in December. That's quite a change since last summer and fall, when Arbor was seeing a 50 percent cancellation rate on home sales because buyers were scared off by stories about the imminent bursting of a real estate bubble, said Wally Remmers, the company's co-owner.

Johnson, the consultant, says he hopes area home builders will show some restraint in coming months and let the market catch up with supply. There are already signs that they have their ears to the ground. The number of building permits issued for privately-owned housing units in the Portland area was 663 in December, down more than 50 percent from December 2005 and substantially less than any month in the last two years, according to census figures.