Portland, Ore.-Area Home Prices Defy Season, Gravity

2005-12-15
The Oregonian

Dylan Rivera, The Oregonian, Portland, Ore.

Dec. 15--Portland-area median home prices in November jumped 19.1 percent from the same month a year ago, adding fuel to an increasingly fiery debate about whether the housing market is slowing or remaining white hot.

The median home price reached $252,500, slightly higher than the October figure of $249,000, according to monthly figures released Wednesday by the Regional Multiple Listing Service. Coming after two consecutive months of a declining median price, it seemed to defy even a seasonal slowdown.

The bucking of that pattern means some home buyers, observing a recent uptick in mortgage interest rates, have jumped into the market before the historically low rates vanish, state economist Tom Potiowski said. It also shows that speculators and investors may still be scooping up area houses, propping up prices.

"Speculators don't recognize seasons," Potiowski said.

Portland area prices have shown year-over-year appreciation even as other markets from San Diego to Boston slowed down in recent months and analysts increasingly came to agree that the nation's housing boom has peaked.

But just because the boom may have already peaked doesn't mean home prices will fall -- especially in a market such as Portland's, which came late to the party and didn't see prices rise as much or as high as many other areas.

The question for Portland, analysts said, is not so much whether prices will decline but whether appreciation will slow into the single digits in the next year, as it has in previously hot California and Colorado markets.

"The markets that have really had some giant increases for longer periods of time are pretty much . . . come to an end," Potiowski said. "I think we're going to follow in those footsteps."

The Portland-area figures are for Clackamas, Columbia, Multnomah, Washington and Yamhill counties.

There's is a small chance Portland-area home prices could decline 10 percent to 15 percent, Potiowski said. But that would be a less-likely scenario and would be spread over several years, he said.

"There's always the possibility of a decline, but I don't foresee a major correction," Potiowski said.

More likely, home price appreciation will continue at a much slower pace, somewhere between the rate of inflation and the rate of income growth, he said.

The National Association of Realtors, the trade association that represents real estate agents, also predicts a slowdown in home price appreciation nationally over the next year. Prices will grow by about 6 percent in 2006, the NAR has forecast, less than half of what it has been this year.

But the NAR rejects the talk of a "housing bubble" that will end in a quick, severe decline in home sales prices, said association spokesman Walter Molony. Rather, the association, which publishes Existing Home Sales data and other closely followed national housing reports, predicts a return to more historically normal housing price growth, which he said is slightly above the rate of inflation.

"Returning to normal is not bad," Molony said. "It's necessary for longer-term health of the market."

Molony said the association predicts interest rates for 30-year mortgages to rise to 6.6 percent by next summer through the second half of 2006, up from about 6.3 percent currently.

"The yellow flag is what is the effect of federal budget deficits on interest rates?" Molony said.

Another yellow flag for a local market would be the extent of speculator activity and use of interest-only and other non-conventional mortgages, he said.

Even with some of those elements in Portland, Molony said the area's economic fundamentals will keep demand strong even as interest rates rise.

"Unless you're in an area where you expect a lot of layoffs and there's been an increase in houses on the market, then you're fine," Molony said.

Portland's more moderate appreciation bodes well going into 2006, said John Karevoll, an analyst with DataQuick Information Systems Inc., a real estate information service based in San Diego.

"Portland prices have not doubled in the last four years, which they have in California," Karevoll said. "When you have measured incremental growth there, as well as a good economic picture, you're much less at risk."

In other news from Wednesday's RMLS report:

--Inventory held at 2.2 months' supply, the same as October. At the rate of sales in November -- 2,623 closed sales, up 8 percent from a year ago -- it would take about 2.2 months to sell all homes on the market. The inventory figure remains near record lows.

--The median home price in Southwest Washington's Clark and Cowlitz counties reached $239,000, 22.5 percent higher than November 2004. Prices in that area tend to be more volatile, in part because the information is based on a smaller number of sales. There were 650 sales in November.

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Copyright (c) 2005, The Oregonian, Portland, Ore.

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