June 2008: The Portland Market: What's Happening?

A note about my statistics:

They are a comparison of May 2007 - May 2008 for all of Multnomah County and are taken directly from the RMLS. What follows is my own analysis of these statistics. For our purposes, I thought it best to analyze Multnomah County as a whole. Each neighborhood, however, is a little micro-universe and has its own market. Changing the parameters of the zip codes, price variables, or time periods can lead to very different results. This analysis is of all homes sold in all price ranges in Multnomah County. If you have any questions about specific zip codes, or any questions about the market in general, please reply to this forum with those questions or feel free to contact me at: http://www.propertiesofportland.com

What's Happening?

Like last month, the Portland market is healthy, especially in comparison to the rest of the country.

For buyers, it has never been a better time to buy since interest rates are at historical lows and it is a definitive buyer’s market. As you can see from the ‘98% of asking price’ statistic below, homes are selling for below asking price. Remember, just a few years ago, they were frequently selling above. One thing I hear frequently is that people are waiting for prices to hit bottom before they buy. The problem with this strategy is that economists never know we have hit bottom until it happened months ago. Also, as soon as things turn around, interest rates will rise making the same priced house much more expensive to finance. The best situation for a buyer is when they are looking for a home to live in and love for 3 to 5 years. This time period will historically move into a new market cycle. Therefore, it doesn’t matter if prices go down a bit. By the time you sell, it will likely be much higher. If you are one of these buyers, you are in the driver’s seat and should act before interest rates rise. Look down the forum for a great article from Time magazine about this situation.

Above all, what matters most is that you find a place to live that you will LOVE. Some people forget that when only thinking of the investment aspect of real estate. Your happiness is an investment too.

Sellers have a challenging time at the moment due to high inventory but, if they do a few important things right, can still sell their home quickly. First of all, pricing is crucial. If a home is priced right, in Portland it will sell. Second, staging is extremely important and worth the cost. Also, make sure you have an agent that has full knowledge of all of the homes in your neighborhood that your home is in competition with. Make sure that, if you put yourself in the buyer’s shoes, you would want to buy your home over all of the others in the same price range. The two most important things to remember: Pricing and Staging. In that order.

Average home prices The average sold price of all homes in Multnomah County in May 2008 is $347,000, in April 2007 it was $361,000. This serves to give you an overall idea of activity in the area this month as opposed to a year ago. Although useful, one shouldn't read too much into that figure as far as direction of prices as it can change wildly from month to month.

The median home price in May 2007 was $300,000 and, one year later, is still $292,000. This can be misleading because it means that an equal number of homes sold above and below this price. It is more effective to look at the average home price above to see overall activity. Think about it… if one $6 Million home sells, it significantly changes the number.

If you look at the percentage of asking price that was paid in May 2007, it was 99%, meaning that houses were selling, on average, for 1% less than asking price. In May 2008, it has dropped 1% to 98%. This is downward pressure on prices from what is asked reflecting the correction of the market. This is a definitive buyer’s market. Another interesting stat to look at is the percentage difference between original listing price (before price reductions) and eventual sales price. This month it is 95%. A year ago, it was 98%.

Inventory is the number of months that it would take all of the homes on the market to sell if not another home went on the market. I use the inventory based on ‘closed sales’. There is also inventory based on ‘pended sales’, however, some of those pending homes will inevitably not sell. I feel that ‘closed sales’ is a better figure to go by. Inventory last month was 7 months and this month it is 6.4 months. Inventory has risen again, however so have sales. Anything over 4 months is a buyer’s market.

How about home sales? In May 2008, 641 homes sold with 720 pending sales, and 4109 on the market. In April 2008, 593 homes sold with 692 pending, and 3855 listed for sale. As you can see, inventory has risen, but so has closed and pending sales. Portland is doing fine compared to the rest of the country, although the market has dramatically changed. Another thing of note is "average days on market". Last month, the average time it took to sell a home was 53 days. This month it is 54 days. This is not any real difference. The peak was 71 days in January. If you have any questions about specific zip codes, or any questions about the market in general, please reply to this forum with those questions or feel free to contact me at: http://www.propertiesofportland.com