2008: Looking back to 2008 and the preceding years
“2005: What a year!
Is this market pace sustainable?
Scarcity squeezes sales numbers in some categories
The numbers are in, and 2005 was another boom year in Central
that the region will experience a slump, much less a bursting
bubble, but there are subtle changes taking place.”
“What a change.. .2007 turns 2004-05 into fading
memory
Is this market pace sustainable?
Such was the observation in early 2006. Now we have the
answer—the pace was NOT sustainable. And those
changes over two years have become much less subtle.
Median prices have gone flat for 2007 and early 2008 ..
And there here has been a dramatic drop in total unit sales
and dollar volume across the region.”
Anyone who dares to predict the future of real estate in early 2009 is either foolish or clairvoyant. I hope I'm not the former and unequivocally confident not the latter.
confident not the latter. Until the waves of defaulted credit default swaps
(CDSs) based on under-collateralized collateralized debt obligations (CDOs)
swamped the markets 2008 looked salvageable. Now the old axiom that all
real estate is local may still hold true. But nearly everything local is having a
tough time.
What some optimists had thought might be a simple “correction” in 2007 has
expanded into 2008 as the worst real estate market in decades throughout
much of the country. But with a change in national leadership and stimulus
(stimuli) on tongue tips and federal bountiful bailouts being pondered everywhere,
the optimists are emerging. Priming that pump is the Federal Reserve’s
continuing charge to beat down interest rates through monetary policy. Has
anyone in several generations heard of mortgage rates at 5 percent or lower?
The nation’s leading television business channel’s “Mad Money,” guru — just
call him Cramer — keeps bantering that June is the turning point for housing,
but with apparent false sincerity. The National Association of Homebuilders are
going out on a limb with hopeful predictions that “...we do expect “09 will be
the bottom..” But in a post script caveat, the NAHB’s chief economist says new
housing starts may drop another 30 percent while sales decline 14 percent.
Trying to time a market bottom is more art than science. In volatile markets,
who can determine with certainty that the light at the end of the tunnel is not
another train on the way? And who wants to catch a falling knife?
What we might conclude is that the tanker is slowing but it may take a while
to turn around and head in the direction we’d rather be going.
Rather than venture into shaky prognostications, it may be more useful to look
back at the steep ascent to the top of the curve and ensuing downward
plunge of the past two years.
Central Oregon real estate segments--Bend, Redmond , Sisters, Prineville, LaPine and Madras-- form a statistical area de Bend
The numbers as reported by two widely followed national agencies that track
housing provide a snapshot of the region’s rise as a housing appreciation hotspot,
and its reluctance to loosen its grip while other areas succumbed in the
national slump.
In mid-2006 the Federal Housing Finance Administration ranked the Bend
metropolitan statistical area (MSA) No. 1 in residential home appreciation
among 292 MSAs. By the end 2008, Bend
250 in the federal charts, and was dropping at a rate of –15.14 percent through
December. The FHFA statistics track homes qualifying for conforming loan limits
of Fannie Mae and Freddie Mac, the federal housing financing agencies.
But even with the plummet in appreciation, a third quarter 2008 report by
Global Insight — a private tracking service — placed Bend
of “extremely overvalued” housing markets. Global Insight’s 4th quarter 2008
report will be issued some time in March.
The report released in December noted that housing prices in most areas of
the country by late September had adjusted to weak demand and “...the incidence
of extreme overvaluation has become negligible.”
But Bend , Atlantic City , NJ and St. George , UT
lone three extremely overvalued markets, according to Global Insight.
REOs and “shorts” force market changes
With the end of 2008 and beginning weeks of 2009, however, there are signs
that Bend
more short sales and foreclosures further depress housing prices.
Bank owned (REOS, or real estate owned) foreclosed properties and short
sales (in which debt may exceed housing equity) accounted for a significant
portion of residential sales by early 2009. And many of these were newer
homes bought in the heady days of 2004-2006 when credit was easy and Central
sizzling housing markets.
The boom or bubble—take your pick—was driven by a
The boom or bubble—take your pick—was driven by a
smorgasbord of creative financing often dubbed as NINJA loans— “no income,
no job or assets”….no problem. Just sign here, skip your principal payment,
pay what you’d like. Now what was wrong with that picture?
The Central Oregon MLS database for sales from December 1, 2008 through
February 12, 2009 reveals the expanding influence of distressed properties on
the regional housing market. In that period of a little more than two months,
there were 529 sales of single family homes on lots of 1 acre or less in Bend , Redmond
Sisters, Sunriver and Three Rivers
