Lending for Commercial Construction Has Increased

An influx of cash for commercial real estate means more projects, and ultimately more jobs.  New apartments are a particularly strong segment of new construction.  And while construction jobs are expected to recover—it will be slow.  About 1/3 of construction jobs disappeared during the Great Recession.

In Eugene, commercial construction is more active than residential.  For example, construction is ongoing on the new $12 million, 69-room boutique hotel at the 5th Street Public Market.

Vision for 5th Street Market Hotel Property

Eugene’s UGB and Affordability

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.

Eugene: 2009 Summary, 2010 Forecast

Not much of a picture, but the best I could do under the circumstances (fog and on Christmas.) This is somewhat analogous to Eugene in 2009–not much of a year, but we did the best we could. We started the year with a terrible real estate market, with inventories close to 2 years. Fear and gloom were palpable with record unemployment and the greatest recession in many of our lifetimes.

While not spectacular, 2009 ended up better. Housing inventory shrank drastically, to around 6 months, and we even had a bit of a seller’s market in some areas. Distressed sales, namely foreclosures and short sales, were prevalent. Record low interest and the first time buyer’s tax credit helped pull us out of the slump.

My forecast for Eugene in 2010:
1) Housing prices will trend up slightly. Median price in Eugene will hover around 200K.
2) Interest will remain low for the first half of 2010, and be in the sixes by year’s end.
3) Unemployment will decrease to 8-9 %.
4) Distressed property sales will continue to play a major role in our housing market, with probably 1 in 10 sales in this category.

2009 Christmas was Foggy in Eugene Springfield.

Tax Credit Extension

The WSJ recently ran an article that had more specifics about the home buyers tax credit, which can be used on homes up to $800,000 and has a maximum income limit of $245,000. The credit does have to be used for the purchase of your principal residence, but you no longer have to be a first time home buyer!

I recently sold this move-up house in South Eugene for 342K, on short-sale, down from the original listing price of 539K. There are plenty of good deals to use the tax credit on.

Short sales are some of the best bargains in Eugene.

FHA reserves low

FHA capital reserves have fallen to ½ %, short of the 2 % minimum required by congress. In part this is due to FHA insured loans gaining in popularity, and in part it’s due to a higher default rate. FHA backed loans are one of the few ways of getting a home mortgage with less than 20% down payment.

So, what’ll happen? Most likely, at least in my opinion, will be an injection of capital from the Treasury. Alternatively, the minimum down payment may be raised from 3.5%, although this would chill the fragile housing recovery, and may be less politically tolerable.

I recently sold this house on short-sale, or pre-foreclosure, to buyers who used FHA for financing.

Down Payments as low as 3.5% are available through FHA.

Rising Home Prices in 2010

Home prices are projected to rise between 3 and 5% in 2010. Inventories of houses have fallen recently, nationwide, because new home buyers are snapping up houses. About ½ of all the sales have been by folks who haven’t owned a home in 3 years. The government’s tax credit is undoubtedly fueling this first-time buyer’s frenzy.

Around Eugene, we actually have a bit of a seller’s market in some areas, as measured by inventories of less than 6 months, which is in sharp contrast to the prolonged buyer’s market we’ve experienced. Prices tend to rise in a seller’s markets.

Inventory below 6 months is a Seller's Market

Home Sales Strong in the West

Sales of low and high end houses were stronger in the West than the nation, according to data presented by the NAR for October. However, homes in the middle price ranges, say from 250K to 750K were selling at a slower rate. Why? I think this represents the over-leveraged middle class who have been hard-hit by the Great Recession.

Low-end and High-end Sales were strong in the West.

Fewer Distressed Sales in Eugene than Nation

1 in 5 homes in the US recently sold were foreclosed and bank owned, according to CNN. I looked at recent sales in the Eugene Springfield area, and we are faring better. In the last month, about 1 in 10 sales of houses were bank owned (11%), and about 1 in 10 (9%) were short sales. Why? Perhaps because our market didn’t rise or tank to such extremes as others in the country.

1 in 5 Sales in Eugene Springfield Were Distressed.

Housing inventory down in October

The supply of houses, listed for sale nationwide, fell by 2.8% in October. Normally, house supply increases by 1% in October, due to a seasonal slowdown in the market. Nationwide, October of this year had 29% fewer houses listed for sale than October 2008.

In Lane County, we fared even better with an October decline of 4.5% from September 2009 levels. October of this year was down 30%. The larger the decline, the better the market. The decline in inventory is due to cheaper prices and the government tax credit, I suspect.

Declining inventory indicates a strenghening market.

Cause of Housing Crisis: DC

So what caused our housing meltdown, which started in 2007? The short answer is policies from Washington, D.C. As a realtor, I occasionally get heat from people saying that I and my fellow realtors are responsible. Other mistaken villains are builders and bankers. Wall Street’s culpability is somewhat less clear.

Two excellent editorials pin the start of the problem on the 1992 GSE Act, which led to the issuance of more sub-prime loans, which as we all saw, default more. The goal of the act was a greater proportion of home ownership; that may or may not be achieved given the high rate of foreclosures.

So, what’s the eventual outcome? Housing will recover as will the economy. It’s just a question of when.

I recently represented buyers in the purchase of this foreclosed home. We got it for 81K, and from showing to closing it was under a month. If you’re interested in foreclosures in Eugene Springfield, give me a call at 517-6543.

Foreclosures are fallout from the housing crisis.