According to CNN, more homes are being purchased with cash these days. Obviously, if you’re purchasing a house with cash, you’re either well-off or, at the very least, not feeling the crunch of the Great Recession.
I took a look at the recent sales in the Eugene Springfield area as reported by RMLS to see if the trend held true to us. In the preceding month’s time period, about 20% were, indeed, cash sales.
That’s pretty high.
The homes did tend to be lower priced though. The most expensive listing sold during that month was my own listing—weighing in at nearly ¾ million dollars. It was not sold for cash, though; but rather a conventional loan was used.
High-end homes are still selling in Eugene.
Trees are very cool, and Oregon probably has more trees than any other state—except perhaps Alaska. In fact, residents here are probably outnumbered by trees some 30:1*. Even though numerous, the cutting of even a dangerous, diseased tree still makes headline news in Eugene.
Many don’t realize that Eugene has several pages of regulations about the cutting of trees. And while they’re a good idea in principle, compliance does increase development costs, which in turn runs up prices and rent.
*Assume 1 tree per 10’x10’ grid, resulting in about 4K trees per acre. ½ of Oregon’s ~62K acres are forested, resulting in perhaps 125 million trees. The population of Oregon is a little under 4 million people.
Eugene cares about its trees.
Experts are saying the prices for houses are close to the bottom—meaning price increases are just around the corner. And, houses are becoming increasingly affordable. Nationally, house prices are less than two-years’ salary. In Lane County, though they’re still higher than that.
However home ownership is part of the American Dream and the net worth of home owners is some 40-times greater than renters.
Is home ownership in your dreams?
Short sales in Eugene and Springfield are becoming increasingly commonplace. While difficult, both buyers and sellers put up with them. Why? For sellers, short sales damage their credit less than other options. For buyers, they represent great values.
Even expensive homes aren’t immune to short sales. Below is an example of a short sale I recently did. It sold for nearly ¾ of a million dollars. At 8 acres and 1/8 mile of McKenzie River frontage it was a great buy.
If short sales in Eugene or Springfield intrigue you, get a hold of me.
In a recent Wall Street Journal article it was reported that the rate of economic expansion (GDP increase) is expected to be its largest since 2003. And while national unemployment is still high, it is expected to dip below 9% by the year’s end. Currently the unemployment in Lane County is still above 10%.
So what does this mean for housing prices? Housing prices are affected by a number of factors, but fundamentally, it comes down to supply and demand. High unemployment decreases demand; you need a job in order to pay your mortgage. I expect a soft market in Eugene Springfield until our stubbornly high unemployment rate drops.
More jobs will help Eugene's real estate market.
Increased density and more multi-family housing in Eugene is what the powers that be see in our future. We’re still a few weeks off from learning if the Urban Growth Boundry (UGB) will grow. My guess is not, but we shall see. The unintended consequence of a tight UGB is higher land cost, and therefore less afordability, but this is often overlooked.
The National Association of Realtors has a neat site where you can compare the prices of houses sold for different U.S. Metropolitan areas. It also lists average commute times; the value of that is a bit of a mystery to me, but it’s mildly interesting.
In the chart below, I show median single family house prices for some Western cities. The average price drop across the nation for second quarter 2009, compared to the same time period last year was 15.6%. All of the cities listed in California did worse. As did Nevada.
Oregon and Washington fared better than the national average. The average decline for the Oregon Cities was: Portland 14%, Eugene 12%, and Salem at 11 ½ %. While the decreases are notable, the bottom didn’t fall out in these markets. Conventional wisdom is that because the Willamette Valley didn’t see the run up in prices at market peak, we had less of a correction at market bottom.
Median house prices of selected western cities. Q2: 2009.
Have we reached the bottom of house prices? Market peaks and troughs can only be seen in retrospect, but the pundits are saying we’re at the bottom. For the last 3 months, median housing prices nationally, in the Western region and in Lane County have risen. If the trend continues, we were at the bottom this spring.
The drop in median prices for the last year was much more muted in Lane county than either the nation or western region. Compare 6.6% (Lane County) vs. 15.4% (US) vs. 20.8% (Western region). The western region’s big drop was because places like California, Nevada and Arizona are part of the statistics, and they were hammered in price.
Are we likely to see huge rates of appreciation? Not anytime soon. There is still too much unemployment in the area and sales of distressed properties (namely short sales and foreclosures) will continue. I expect the market to stay flat at least until the end of the year.
Median House Prices up for Last 3 Months
One measure of properties’ appreciation or depreciation is average house price. It’s not exact–it’s really a measure of the average selling prices of houses in any given time. So, for instance, if during hard economic times, people with lower incomes were disproportionately affected, which caused them to sell their houses, where better-off people may choose not to sell, the average price of houses sold would probably be lower.
There’s no doubt that house prices are lower now, in July 2009, than they were in previous years, namely 2008 and 2007. How much lower is a good question. One of my appraiser friends uses 7% in his reports but will tell you privately that it’s more like 10%. This corresponds with my anecdotal evidence of $165/SF to $150/SF from market peak to now, at least in Eugene.
There are 3 measures of central tendency, mean, median and mode. If you look at mean (what most think of as average) and compare it with mode, you can tell (if you remember your statistics) if there are more high-end or low-end houses sold in comparison to the median. Median price in Lane County for June 2009 was: 209.65K, while mean was: 228.5K. This indicates that there were more high-end houses also sold, above the median price. Those numbers come from the most recent RMLS stats.