Best And Worst U.S. Housing Markets

Matt Woolsey, 05.15.07, 4:00 PM ET

Live in Seattle? If you own your home, chances are you're celebrating.

That's because the city's median home price in the first quarter of this year hit $380,200, an increase of 12.3% from a year earlier, according to data from the National Association of Realtors (NAR). Median home prices in the Pacific Northwest as a whole soared; in Portland, Ore., prices jumped 8.9%, and in Salem, Ore., they grew 15.6%.

Southern metros also boasted gains. In San Antonio, prices went up 11.2%, and Austin, Tex., prices climbed 5.4%. Charlotte, N.C., and Raleigh, N.C., rose 6.4% and 6.3%, and Richmond, Va., and Norfolk, Va., improved 6.2% and 5.9%.
In Pictures: Best U.S. Housing Markets
In Pictures: Worst U.S. Housing Markets

"What we're seeing now are the areas which still have a strong economy, but didn't have the overheated prices [during the housing boom], are the ones holding on strong now," says Kermit Baker, a senior research fellow at Harvard University's Joint Center for Housing Studies.

In the Northeast, the New York City metropolitan area turned in a steady 1% growth rate, and smaller metros like Albany, N.Y.; Trenton, N.J.; and Allentown Pa.--which improved by 6.3%, 7.1% and 5.8% respectively--helped overcome Boston's continuing slump to lift the Northeast to a 1.2% overall price growth, making it the only region in the black.

Now the bad news.

Cloudy Skies
Median home prices in Florida are down, according to NAR: Tampa by 2%, and Sarasota, Palm Bay and Daytona by an average of 9%. Overall, Florida prices plunged 25%, making the Sunshine State not so sunny. Miami, however, which had been hamstrung early in the housing downturn, improved by 2%. The rally may be tenuous however, as 23% of Miami housing loans are subprime, according to First American LoanPerformance, a mortgage data provider.

"We've had 30 subprime lenders go under, which leads to a tightening of credit," says Jonathan Miller, president of Miller Samuel, a New York-based real estate appraisal and consultancy firm of lenders nationwide. "That adds one more barrier to transactions, something that couldn't have come at a more delicate time for the housing market. On a national level, there are a lot of markets which are going to have some problems."

The Gulf Coast, where home prices had roared back at a double-digit clip the year following Hurricane Katrina, is one such market. Biloxi, Miss., grew by 15.7%, and Baton Rouge, La., by 9.7%, but the subprime hammer came down on New Orleans, where a 20% delinquency rate on subprime loans contributed to an 11% drop in home values, the NAR reports.

Worse News To Come?
For many markets, things may get worse before they get better. Nationwide, prices fell by 6.6%, a number that makes sense at this point in the housing cycle, experts say.

"When housing prices slip, nothing really changes until you try to sell, which is what we've had happen in the last couple of months," says Miller. "I don't think the housing slowdown has fully hit the national economy yet."

Overexpansion was a problem for most metro areas. Homeowner vacancy rates stood at 2.8% in the first quarter of this year, a statistically significant rise from the 2.1% rate a year ago and the 1.7% average between 1995 and 2005, according to the U.S. Census Bureau.

Those high inventory numbers flatten prices and make new development less lucrative.

"It's becoming more difficult to put together financing for new development projects," says Miller. "That'll actually provide some constraint on supply, but that's a couple years down the road. You figure the lead on new development is probably two years, so it's going to be a couple years before units stop coming off the conveyor belt."

Moving forward, there is concern surrounding the strength of the national macro economy. In the first quarter of 2007, growth came in at a disappointing 1.3%--hampered by 4% inflation--but the Federal Reserve predicts growth between 2.5% and 3% for the remainder of 2007.

"We do have a massive inventory correction, which will happen a lot easier and a lot less painfully if it continues to happen during an economic expansion," says Baker. "The fear is now that even though the direct housing hit was absorbed, the indirect hit could be serious too. We're into that now, but it doesn't look like it's enough to throw the economy into recession."

Some might disagree. Fears about the ripple effect of the housing market have traders particularly bearish.

The S&P/Case-Shiller housing futures market on the Chicago Mercantile Exchange is based on repeat sales of homes across 10 markets ranging from Boston to San Diego. There, traders are betting on a 4.5% decline from now until next year.

"There's a limitation to the futures market, because it only trades one year forward," says Fritz Siebel, a broker with Traditional Financial Services, the largest trader of housing futures. "For 2007 to 2008, the market doesn't look good, but it doesn't mean there's not a bottom around the corner."

Housing outlook in 2007? Weaker

Real estate - Two experts predict there will be a shift to a buyer's market with a slowing in the rise of prices

Friday, December 08, 2006
DYLAN RIVERA
The Oregonian

The Portland area housing market will further weaken in 2007, two economists told a gathering of the Home Builders Association of Metropolitan Portland on Thursday.

Prices will still rise, they predicted, but at a lower rate. Some areas, such as the condo market, could see even more downward pressure on prices because of oversupply. Sellers who think they have the upper hand now -- despite buyers who argue the other way -- could be in another world next year.

"It's going to be a shift to a buyer's market," predicted Jerry Johnson, of the Johnson Gardner economic consulting firm in Portland.

Johnson discussed the local housing market and Dae Baek, acting chief economist for the state, analyzed the state and national economies during the association's annual housing forecast breakfast. Much is at stake next year, which may explain the larger-than-usual crowd of about 600 people at the Oregon Convention Center.

The recent housing boom has drawn thousands of people to the real estate industry, helped propel the state's economic growth and generated billions of dollars in wealth that spurred the national economy. But recent signals of a weakening market, locally and nationally, have created new worries inside and outside the industry.

For several years, forecasters warned of a cooling market, and only this year did reality appear to follow expectations, at least in the Portland area. Inventories rose gradually through the spring and summer. The region's median sales price began a seasonal decline in late summer, earlier than the typical fall slowdown.

What to expect next year? A little unclear, but definitely a weaker market. The economists shirked away from presenting specific appreciation rates, though Johnson said Portland-area home prices will rise about 5 percent to 8 percent next year, compared with the recent high teens of 2005 and early this year.

Housing permits and starts are "in the throes of a sharp correction," Baek said. Housing permits in Oregon were down 14 percent this year through October, compared with the same period last year. Permits declined 23 percent to 36 percent in the Bend and Medford areas; 6.3 percent in the Portland area and 6.4 percent in Salem.

The cooling housing market will continue to drag the state's economy, Baek predicted. Jobs will be lost in housing-related industries, he said, and rising inventories and pressure on prices could make consumer feel less eager to spend money at retailers.

The problem of high inventory may be "darker than it shows in statistics," Baek said, because sale cancellations might not be fully reported in those figures.

Yet, inventory levels in the Portland area are still lower than those nationwide. And mortgage interest rates remain relatively low, which helps make housing affordable, Baek said.

Baek said he expects many sectors of the state's economy to contribute to job growth. Population growth would also help, he said.

"That will surely help moderate the pain coming from the housing sector," he said. "2007 is a slower year, but the economy will not tank and if you hang in there, the second half of 2007 will be better."

Both Baek and Johnson said population, job and wage growth are helping mitigate the housing downturn in the region.

"It's not a demand problem, it's a supply problem," Johnson said.

The supply of homes for sale may be rising, Johnson said, but only because builders haven't pulled back enough. Building permits should have fallen 10 percent this year, but they fell 6 percent, he said, "so we still have some more to go."

Johnson was particularly concerned about the condo market. Although there are about 4,000 urban condos in the works, there are about 16,000 planned throughout the region, including many small projects that are not easily tracked, he said.

All that inventory could increase the number of buyers withdrawing from sales contracts and lead to falling prices, he said.

This seems to be at odds with the view of many real estate agents in the urban market, who consider their market distinct from the suburbs.

"If you bought a spec condo last week it was probably a bad buy," Johnson said. "But if you bought it two years ago it's probably OK, but will be giving some (value) up."

Big homes put squeeze on neighbors

Building of large houses stirs controversy citywide, but officials remain mum
By JESSIE KIRK, PAMPLIN MEDIA GROUP Issue date: Fri, Mar 17, 2006
The Tribune

For the last four years, Suzanne Van Fleet and her husband, Craig Marcussen, have lived in a home they enjoyed on Southwest Twombly Avenue, near Dosch Road in the Hillsdale area. In their backyard a white picket fence and leafy trees ensured their privacy.
But now, above those trees looms a 3,300-square-foot house being built on nearby Southwest Washouga Avenue.
“We had a lot of privacy because it was an empty lot,” Van Fleet said. “Now when you look out any window, all you see is this house.”
She said she knew a house would be built in the lot eventually but didn’t expect it to be so large.
The big house on the block is a common topic of discussion throughout the neighborhood. Some of the residents refer to the house as a “McMansion,” a term that implies a large generic home plopped down in any neighborhood. Others call it a hotel. One neighbor claims that it’s half the size of Timberline Lodge.
The message is clear — from eliminating privacy to eclipsing views, the neighbors say the house doesn’t fit in with the character of the neighborhood.
The home was built by Beacon Homes Northwest. It is listed at more than $1 million. Joelle Lewis of Re/Max, the real estate company selling the house, says demand for such homes is high.
“In our climate people tend to live inside their homes, and so they love the square footage,” she said.
Lewis said the house is high quality and will benefit the neighborhood by raising property values.
“As much as the neighbors like to complain about it not fitting in, it does tend to raise property values by at least 10 percent across the board,” she said.

Neighbors petition city

The issue is not isolated to Southwest Portland. Residents in other areas of the city are saying they don’t want to live next to a house three times the size of their own.
Last April, the members of the Mt. Tabor Neighborhood Association voted unanimously to formally request that the city, the Portland Planning Bureau and the Portland Planning Commission, which oversees the bureau, begin a process to prevent out-of-scale homes from being built in established residential areas of the city. The letter claimed that the houses were “grossly out of character with our neighborhood.”
According to the group’s land-use chairman, Dave Hilts, the city did not respond to the letter or the accompanying petition signed by about 50 neighbors. Hilts said he hoped the letter would get the city talking about changing the zoning codes, but so far nothing has come of it.
“They should either build out on a residential lot to the current maximum size or build out to maximum height, but not both,” he said. “There would be a trade-off.”
Plans for a denser, more compact Portland don’t look that good to some members of the Argay Neighborhood Association, either — at least when it comes to the 3200 block of Northeast 135th Avenue. At issue is a plan to subdivide a property there to include a second home toward the rear of the lot.
According to acting association Chairwoman Valerie Curry, some residents have concerns about losing their privacy and seeing property values decline. A number of neighbors also fear that where they once had views, they’ll soon only have a view of someone else’s bedroom, she added.

Residents hit boiling point

The controversy extends to nearby cities, too. For example, in Lake Oswego, housing size long has dominated public debate. Where land values in the built-out community now outstrip housing values, structures above the ground have become incidental and a target for bulldozers.
Though the city has one of the most stringent infill ordinances in the region, neighborhoods have stepped up to add particulars to those restrictions, shaping new housing to fit in with old, one district at a time. In some areas, building has outpaced the rules, and discord between neighbors has erupted.
In the town’s historic First Addition, where more than 10 percent of the original housing has been torn down, neighbors regularly spar over new construction, facing off at hearings over tree removal, for which the city’s strict tree protection ordinance offers a platform for debate. At the site of one home built last year, neighbors frustrated over its size made tongue-in-cheek calls to police about noise, stole tools and threw cigarette butts on the lawn.
On Oswego Lake, one home proposed to extend over the water prompted a public battle that lasted more than two years. The proposed home, which topped 12,000 square feet in some designs, became the subject of two state-level appeals and innumerable city hearings on tree removal. Opponents to construction held a garage sale that raised several thousand dollars for legal costs last summer. A final city hearing March 7 drew more than 100 people to testify, and police were asked to keep the peace.
After six months of negotiations, neighbors finally struck a deal with the home’s developer, Jeff Parker of West Linn. Parker agreed to reduce the size of one wing of the house and drop a defamation suit against some of the neighbors, in exchange for their withdrawing legal challenges to the house.

Infill is recurring topic

The issue of large houses towering over smaller homes is especially hot in Southwest, where many of the established neighborhoods comprise one-story ranch homes and craftsman bungalows on large lots. Again and again, Southwest residents have complained that the large houses don’t fit into the character of the neighborhood, obstruct their views and reduce their privacy.
A few years ago, signs appeared in the Corbett/Terwilliger/Lair Hill neighborhood saying, “No more Monstrosities.” For much of the past year, concerns about large infill houses have dominated the montly meetings of the Maplewood Neighborhood Assocation.
“Infill seems to be the No. 1 concern of the Maplewood neighborhood,” resident Kyle Lesko said. “Over half of our monthly meetings are spent discussing some aspect of infill since I’ve been attending.”

Trees have defenders

Among other things, the Maplewood residents complain that the homes and their driveways are bad for the environment.
“Developers seem to think that these mature trees get in the way of them building their enormous houses and would rather leave the minimum amount required by law,” Lesko said. “These trees add to the livability of the neighborhood, use water to decrease erosion and runoff, and provide habitat for animals.”
However, current city building rules allow large homes to be built in existing neighborhoods, said Matt Wickstrom, the city planner who approved the planning and zoning of the Washouga house. According to Wickstrom, the rules allow for new homes to be 30 feet tall and to sit 5 feet from neighboring homes on the side and rear, and 15 feet from the front.
If the Washouga house seems larger than what should be allowed, Wickstrom points to the fact that it resides on a slope. Because the house sits on a slanted grade, the city allows for an extra 10 feet from the lowest part of the structure, allowing the house to be up to 40 feet tall, Wickstrom said.
It isn’t just the size of the houses that people are complaining about, however. It is the sense that they don’t belong among the mix of ranch-style and craftsman houses that have been in the area for more than 40 or 50 years. Homes three times the size of neighboring homes darken lots and require the destruction of old trees, which help provide for drainage.
“It’s the typical McMansion,” Van Fleet said of the Twombly house. “It’s a house that takes up the entire lot, and that’s not how this neighborhood is.”
But according to Wickstrom, fitting in with the neighborhood is not a requirement of city codes.
“In this area there are no requirements in the zoning code for compatibility with adjacent development,” he said.
Jeff Eldredge, a representative from the Portland Bureau of Development Services, which inspects new homes, agreed that while many city agencies must approve the plans of new houses, it is rare that the neighboring houses are a point of consideration.
“Very seldom is the site looked at before the plan is approved,” he said.
And while the zoning codes say that developers should “work together to promote desirable residential areas by addressing aesthetically pleasing environments, safety, privacy, energy conservation and recreational opportunities,” according to Van Fleet, the city needs to take another look at zoning guidelines because the house built in her backyard is not aesthetically pleasing, nor does it promote privacy.
“I think the zoning laws are not restrictive enough in this area, and this is proof of it,” she said.

Density reduces sprawl

Density advocates say it is important to lure people closer to the central city, however, arguing that infill development uses the existing infrastructure, reduces sprawl and raises property values.
“Population density enables things most Portlanders value — mass transit, walkable clusters of local businesses and access to local town centers,” said Dan Eisenbeis of 1000 Friends of Oregon, an organization that promotes land-use planning. “Having a population base that can support local shops improves the neighborhood character.”
While not many say they enjoy living next to one of the large-scale homes, demand for them is high. Statistics show that home buyers are looking for more room these days. According to 1000 Friends of Oregon, the average home size in Portland has grown significantly in the last few decades. New single-family homes in the Portland region averaged about 1,500 square feet in the 1950s and 2,250 square feet in the 1990s.
At the same time, Eisenbeis said that infill developments should complement the character of an area.
“We should be striving for good design and development. A poor design element isn’t nice to live by,” he said.

Lee van der Voo of Pamplin Media Group contributed to this story.

High-density housing will rise in Oregon City

Thursday, March 24, 2005
Developer: Millennium Homes, Portland Project: 47-lot residential subdivision Status: Construction is scheduled to begin in 60 days. The first homes should be available in six months. The land was annexed into Oregon City last year. The Oregon City planning department approved the project, but the decision was appealed by a neighboring property owner. City commissioners turned down the appeal last week. Details: Homes will be 1,500 square feet to 1,800 square feet and priced between $200,000 and $225,000. This will be Oregon City's largest high-density subdivision. Lots in the 6.1-acre development will be 3,500 square feet. Information: 503-489-0763

Shortage of housing a problem, expert warns

The Portland area's three-month supply puts pressure on buyers, says the chief of RE/MAX
Tuesday, January 18, 2005
DYLAN RIVERA
Low inventory has defined the Portland-area housing market for the past year.

In May, the 8,054 active residential listings would have sustained the market for a record low 2.8 months, based on prevalent sales rates, according to RMLS, the primary regional real estate listing service. Inventory stayed at supplies of 2.4 to 2.9 months through December.

The shortage pushed the area's median sales price to $204,500, up 9.35 percent over the recently revised $187,000 median recorded for 2003.

Daryl L. "Jes" Jesperson, chief executive officer of RE/MAX International Inc., said last week in Portland that such a valuation rise on the back of low inventory should cause concern for anyone interested in the region's housing market.

Jesperson was in Portland on an annual visit to discuss strategy with local agents of RE/MAX Equity Group, the highest-volume brokerage in the Portland area.

Here are excerpts of an interview he gave with The Oregonian:

How is Portland's real estate market regarded nationally? How do we compare with other areas in terms of appreciation and new home starts?

I think you're doing pretty well. What I would really watch closely, because it's going to affect your appreciation rates, is the inventory on hand. You have very, very tight inventory. You're under three months' worth.

A well-balanced marketplace is going to have six, eight months' worth of inventory. You get down to three months' worth of inventory, you put buyers in a difficult situation where you either choose this house that's really close to your needs, or in two weeks we're going to come back and it's not going to be available.

Your appreciation was higher last year as your inventory went down. Appreciation's great if you're owning. It's tough if you're on the outside.

So that makes the market exceedingly hard for buyers?

It takes away their ability to make decisions in a rational manner. They act irrationally because they feel time pressure. They're afraid that the next buyer's going to walk through and make an offer, that house isn't going to be there and there isn't another one like it.

What I've seen in other markets for the first time in the last couple of years is people taking their homes off the market in the November-December period. They don't want to be interrupted through the holidays, and then they put it back on the market after the first of the year.

One advantage of putting it back on the market after the first of the year is you get a fresh picture in the multiple listing service. So you may not have the snow in the front yard or whatever.

So your inventory may grow some over the next couple of weeks, but I'd watch that real close. If it stays under three months, you're going to have a lot of frustrated people in the marketplace because there is no selection out there.

There's talk nationally of a housing bubble. Do you think there's some sort of irrational bubble?

There's no basis to it.

Real estate is a local market. You can have escalation in one, and depressed prices in another market. For example, prices are going nuts in Manhattan, but some of the lowest housing prices in America are in Buffalo, N.Y., 400 miles away. It shows you that it's local markets.

As far as a bubble, what happens in real estate is you have rapid escalation, and then all of a sudden, some of the buyers start saying, "Look this is nuts. I'm not going to participate in that."

They can't afford to, and the lenders won't lend on it, and the appraisers won't appraise on it. And so it plateaus, and the market gets a chance to catch up.

With the rise of the Internet, consumers have much more information available. Why should they use an agent at all?

First of all, they are still using agents. The reason they're still using agents is it's the largest financial transaction that you enter into in your lifetime. And you cannot possibly learn enough on the Internet.

You might learn about the property, you might become more educated as you come to the process, but I'll tell you it's pretty scary sitting down at a closing table realizing that you're betting your $40,000 in equity or whatever it is that you're going to get this thing right on what might be a once-in-a-lifetime thing.

It's like doing your own heart surgery.

A national trend that's playing out here is that condos have been very hot sellers. What's driving that?

Over time, the cost of land has caused housing to change. That's why our starter homes are coming in as town homes and condos. The cost of the house is so much now, you can't afford to buy a section of land to go with the house.

When you get into a city, there comes a point where people don't want to drive 45 minutes to get to work. It's happening all throughout America.

It's attractive to all levels of people on the housing ladder. There are people, particularly high-tech people, who travel a lot. They can't manage a yard or take care of a swimming pool. A condo makes all the sense in the world for them.

As our culture changes, our housing has to change.

At what point will the condo market fall off a cliff like it did in the 1980s? Is that ahead for us?

I don't believe so, because if you go back to the problems in the '80s, it was all banking-related. Bankers have unbelievably long memories. As long as this generation of bankers is around, I don't think that's going to happen.

Copyright 2005 Oregon Live. All Rights Reserved.

Portland Metro Real Estate 2003 / 2004

New listings: up 2.2%
Home sales: up 10.7%
Avg. sale price: $222,500
Avg. appreciation: 5.6%

It should come as little surprise that the Portland area residential real estate market had a fantastic year in 2003. Last year was a record-breaking year in the Portland area as well as Clark County. New benchmarks were set for the number of homes sold and for total market volume. Demand was up, fewer homes were on the market, and mortgage rates spent most of the year at rock-bottom levels.

In Portland, 31,013 homes were sold in 2003. Representing a whopping 10.7% increase over 2002, home sales themselves only told half the story. The other big indicator for the market was that homes were not being put up for sale nearly so fast – only a 2.2% gain against the year-ago numbers. In all, 47,162 homes were put up for sale last year in Portland, creating a market that where demand for homes is outpacing the number being listed for sale.

Partially thanks to this phenomenon, the average sale price for a home in Portland jumped to $222,500 last year, representing a 5.6% appreciation rate. This is good news for both home sellers and home buyers. Though modestly rising in price, homes in Portland are still very affordable relative to other large metropolitan areas on the West Coast – and they consistently produce a measurable return on the investment.

2004 Outlook for Portland

2004 has opened to a healthy start in Portland with little sign of any mortgage rate increases on the horizon. The consensus among experts is that any rate increases will be marginal due to the election year. As the regional economy continues its recovery and jobless rates decline, demand for homes should remain on pace with 2003. With the market stabilizing, it is anticipated that more people will list their homes for sale rather than hunkering down in anticipation of a potential financial problem in their personal lives. This bodes well for the regional real estate market, as supply should increase to meet the continuing healthy demand.

While 2004 may not exceed last year's record shattering real estate market, home sales activity should remain brisk. Home price appreciation on the market level should remain in the healthy 5% range.

Vancouver & Clark County
New listings: up 0.2%
Home sales: up 21.5%
Avg. sale price: $196,700
Avg. appreciation: 7.8%

There were 7,673 homes sold in Clark County in 2003 – a new record, easily beating 2002’s mark of 6,747 closed sales. Year-end sales for residential properties throughout the Clark County area were up a remarkable 21.5% for closed sales (see attached graph). Largely due to steady appreciation of average and median home sale price throughout the year, the total dollar volume in Clark County ballooned to $1.5 billion, another new record. This figure represents a 25% leap over 2002’s then record $1.2 billion in closed sales. As one of the largest real estate firm in Clark County, Coldwell Banker Barbara Sue Seal Properties figured into nearly 15% of this volume.

Many Realtors in Clark County point to the influx of Oregonians into market as being the decisive factor in the boom. It is no secret that Clark County is a huge growth area, driven by its status as a tax haven, affordability relative to Portland, and exceptional schools. Some Realtors report as much as half of their clients are moving from the Portland area.

The average sale price of a home in Clark County increased a healthy 7.8% to $196,700. Homes appreciated at a higher rate than almost anywhere else in the area. For comparison, the Portland metro averaged a 5.8% increase. The areas with the highest appreciation over the course of 2003 were Downtown Vancouver (14.3%), Camas City (14.6%), Brush Prairie (12.7%), and La Center (12.7%). Perhaps not surprisingly, the highest average sale prices in specific areas were found in Camas City ($273,600) and Brush Prairie ($271,500).

2004 Outlook for Clark County

Homes are being snatched up in record numbers across Clark County, though the number of homes being sold is maintaining the status quo. RMLS data indicate that 2003 saw a whopping 1,249 more closed sales than the year previous, with only 23 more homes were put on the market in the same amount of time. 2002 had 10,591 new home listings, 2003 just bare edged that mark with 10,614. 2003 also saw a dramatic reduction in the average time a home in Clark County stayed on market. Last year in this area, homes spent an average of 67 days on the market compared to 79 days in 2002. Also significantly, the available number of homes as calculated by RMLS has diminished to 3.2 months. Should no more homes be put on the market, the available supply of homes would be sold in 3.2 months. If the traditional holiday season lull in home transactions is taken into account – and the subsequent rebound as the weather improves – this number could actually be much lower. All of this could mean higher prices, and a tighter market in Clark County throughout 2004.

Many experienced Realtors are predicting that the brisk market in Clark County will continue at least through the end of 2004. Although it is moving rapidly toward to seller’s market with rising home prices, the constants remain the same: schools, taxes, and affordability. There is no sign of it slowing down, and some even predict a busier year than last year’s record breaker.

Best interest rates in years continue:

It is almost universally accepted that the housing market in the Portland/Vancouver metro area, not to mention the national market, performed so well in 2003 due to exceptionally low interest rates on mortgage loans. According to the most recent data available from the Federal Housing Finance Board, the month of December 2003 saw the average interest rate on conventional 30-year, fixed-rate mortgage loans decrease to 6%. The average interest rate on conventional 15-year, fixed-rate loans decreased to 5.79%.

Conditions on interest rates remained extremely positive throughout 2003. Based on data from Freddie Mac, Interest rates on 30-year, fixed-rate mortgage loans reached their highest level on Sept. 4, 2003 at 6.44% -- as did 15-year loans, at 5.77%. Conversely, rates bottomed out around mid-June 2003, with an advantageously low rate of 5.21% and 4.60% for 30-year fixed and 15-year fixed respectively.

Breakdown by Area:

Beaverton

New listings: up 1.5%
Home Sales: up 10.4%
Avg. sale price: $200,300
Avg. apprreciation: 4.5%

Residential real estate in Beaverton was solid performer all year long. Though about the same number of homes were listed for sale as in 2002, many more were purchased. Beaverton real estate also remained attractive due to its affordability relative to the rest of market, as well as due to solid appreciation rates in home values. There were 3,012 homes sold in the Beaverton/Aloha area in 2003. That mark signifies a robust 10.4% increase over 2002’s total of 2,699, and an overall record for homes sold in a year for the area. Average sale prices in Beaverton grew to $200,300 last year, up from an average of $192,000 the year previous – though still shy of the $222,500 average sale price throughout the broader Portland metro.

Appreciation in home prices grew at a modest 4.5% during the year. Though more than a full percentage point behind the rest of the Portland metro area’s 5.8% rise in average home value, 4.5% represents an encouraging, stabilizing trend of moderate-to-good home appreciation rates after several years of fluctuation.

The success of developments such as The Round in Beaverton’s core contributed greatly to the success of the Beaverton real estate market. The condominium properties there have been moving well, thanks in large part to prolonged demand from unexpected sources across the market’s spectrum.

2004 Outlook for Beaverton

Last year saw 3,000 homes sold in a year for the first time on record. Cracking this barrier also represented the largest one-year leap in home sales in the past decade, truly a remarkable event. Even though new listings only increased by 1.7%, supply seems to have kept up with demand, keeping home prices very affordable relative to the rest of the market. The leveling off of appreciation rates indicates a balance might have been struck between new construction, existing home sales, and consumer demand – boding well for buyers, sellers, and homeowners in 2004.

Clackamas County:

New listings: down 0.7%
Home Sales: up 14.7%
Avg. sale price: $215,450
Avg. apprreciation: 6.3%

The Clackamas/Happy Valley area simply could not put enough homes up for sale in 2003. Home sales exploded, up almost 15% over 2002. With a final closed home sales count of 2,088, this incredible push allowed the Clackamas/Happy Valley area to record more than 2,000 homes sold in a year for the first time on record.

Following the trend throughout the area, homes put up for sale did not keep up with buyers’ demand. In fact, the number of homes listed for sale in Clackamas/Happy Valley (3,180) actually shrank in 2003 compared to the year before (3,203). With such a high demand, it is remarkable that home prices ‘only’ appreciated 6.3% in the area. Average home prices settled at $214,500 at the end of the year, a shade less than the average throughout the metro area.

2004 Outlook for Clackamas/HappyValley

There is no reason to expect anything other than the red-hot market to continue in Clackamas/Happy Valley this year. As long as mortgage rates stay at such low levels, the demand for homes, as well as the ability for people to buy them, will continue unabated. Even should the interest rates rise, it will bring the market closer to harmony between supply and demand. Either way, Clackamas/Happy Valley will be a spot worth keeping an eye on 2004.

Lake Oswego:

New listings: down 10.3%
Home Sales: up 7.8%
Avg. sale price: $345,151
Avg. apprreciation: 4.5%

Market demand was up significantly in Lake Oswego/West Linn last year as fewer homes were put on the market – which makes the fact that Lake Oswego/West Linn area shattered the record for home sales in 2003 that much more impressive. According to the Regional Multiple Listing Service, new listings were down 10.3% from a year ago (2,677 new listings vs. 2,987) but closed sales rocketed up 7.8% (1,834 closed sales vs. 1,691). 1,834 closed sales are the most ever seen in the area. Not surprisingly, homes sold at a much faster rate. In 2002, the average home in Lake Oswego spent an average of 82 days on the market. The last quarter of 2003 saw homes being bought very quickly. With an average time on market of only 68 days – a full two weeks less than the same period a year ago. Given the traditionally slow 4th quarter, when winter and the holidays typically cool the market, this figure is doubly impressive.

Traditionally, the Lake Oswego/West Linn residential housing market has been robust. Augmented with a large number of upper-tier properties, the area usually is near the top of the Portland metro area in terms of average home sale price. Last year, the total market volume of Lake Oswego/West Linn residential real estate was $1.275 billion , also the largest total on record. In 2003, the average sale price for a home in Lake Oswego/West Linn appreciated 4.4% to $345,151.

2004 Outlook for Lake Oswego

Largely due to the make-up of the Lake Oswego/West Linn properties, the nature of the residential real estate market is insular, and can be resistant to the fluctuations found in other areas. Because homes generally cost more in this area, the increased demand and reduced inventory is cushioned somewhat by the simple fact that not as many buyers can afford properties in this price range as in other areas – thus reducing the overall buyer pool. As such, a typical prediction would suggest moderate growth in home prices, steady appreciation in value, and healthy demand for the properties in this area.

Canby/Oregon City:

New listings: down 8.5%
Home Sales: up 7.1%
Avg. sale price: $217,300
Avg. apprreciation: 6.8%

According to the RMLS statistics for the Oregon City/Canby area; which includes Oregon City, Beavercreek, Canby, Molalla, and Mulino, market demand was up slightly in 2003. With and 8.5% decrease in new listings and a 7.1% increase in closed sales, the market got a little tighter throughout the area. Homes coming into the market were not being replaced as quickly as they were being sold, creating a slight increase in demand as well as a healthy 6.8% appreciation rate – outperforming the Portland market average by whole percentage point.

With listings being down last year, it was definitely a seller’s market. In Canby, homes under $200,000 were selling very quickly and new listings were taking a long time to come on the market. The most sought after property is still in the Canby School District and Hubbard has had a significant growth spurt but right now, there are only a handful of homes on the market there.

2004 Outlook for Oregon City/Canby

The banner year enjoyed by residential real estate across the Portland metro and the rest of the country did not skip the Oregon City/Canby area. Appreciation outperformed the market average, home sales broke a record, and mortgage rates remained low. So far, there has been little news to suggest 2004 would bring anything different to the residential real estate market than the year previous.