Portland home prices stable while most cities slide
The metro area is among five in the nation in which housing values escape decline, but 2008 could be different

Wednesday, November 28, 2007

RYAN FRANK
The Oregonian

Portland-area homeowners can smile this morning: You live in one of just five cities where home values are still rising.

Jacinda Kirk, a 26-year-old renter in suburban Seattle, can help explain why.

The former Portlander would like to buy a place outside of Seattle, but she can't afford it. "We left the Portland area thinking it was expensive," Kirk said. "We moved to Seattle and said, 'Oh. my gosh. We love Portland prices.' "

That's why she's looking at moving back to the Portland area. And that's in part why home values in the Rose City remain stable: People keep moving here, fueling demand and prices.

On Tuesday, a key U.S. housing measure reported the biggest quarterly decline in the index's 21-year history. Prices of single-family homes in the third quarter fell 4.5 percent nationwide compared with a year ago, according to the Standard & Poor's/Case-Shiller index. The index is one of the most reliable ways to track home prices, and it's widely followed by Wall Street.

In the Portland region, the index covers single-family home sales in Clackamas, Columbia, Multnomah, Washington and Yamhill counties in Oregon and Clark and Skamania counties in Washington.

Compared with a year earlier, Seattle and Charlotte tied for the biggest home price growth in September at 4.7 percent. Atlanta and Dallas also reported more modest gains. Portland's home values were up 2.2 percent, third highest.

"In the grand scheme of things you guys are doing just peachy," said Amy Crews Cutts, deputy chief economist at Freddie Mac, the mortgage giant.

But the national mortgage market meltdown and general economic troubles could drag down Portland next year. That means Portland's price growth is not expected to last through 2008.

Low foreclosure rate

Sure, the housing market in Oregon and Portland is suffering some. But it's a fair bit better here than most places.

The rate of foreclosure filings is rising here, but Oregon still has one of the lowest rates of troubled mortgages.

Portland ranked No. 413 of 427 U.S. cities in the rate of delinquencies for subprime loans in July 2007, according to LoanPerformance, a San Francisco company that analyzes mortgage performances for lenders and investors.

In another measure, the Mortgage Bankers Association said Oregon had the nation's second-lowest foreclosure and delinquency rate in the country this spring. Of Oregon's 627,000 home loans, about 3,000 were in foreclosure and about 15,000 were at least 30 days past due.

So what's keeping Portland buoyant?

People keep moving to the area.

About 102,000 people moved to the Portland area from out of state in 2006, about 5 percent of the year's total population, according to the U.S. Census. That's lagging behind Boise and on par with Seattle, but far faster than Sacramento, San Francisco and Los Angeles.

Some come because they want to escape bigger cities. Others follow their kids. And others, like Kirk, come for the friendly prices. "Affordability is a big issue right now," said William H. Frey, a senior fellow and demographer at the Brookings Institution.

Oregon job growth, until recently, has outpaced national averages. More jobs mean more people have enough money to make the mortgage.

Oregon crawled out of the post-Sept. 11 recession slower than most places. The result was the state and its biggest city were slower to join the hyperventilating housing boom. Economists say that means home values aren't as likely to collapse in Portland as elsewhere. Home values in Los Angeles and Miami are up about 150 percent from their 2000 value. In Portland, they're up about 85 percent, according to the Case-Shiller index.

"The damage should be less because you didn't have the incredible boom, and you're not Detroit, where the auto industry seems to be going out of business," said David Blitzer, chairman of the Case-Shiller index committee.

Oregon and Portland have relatively few subprime loans, those given to risky buyers and now most at risk of foreclosure. In California and Florida, risky loans were popular because people had to stretch their dollar to get into homes that were rising much faster in value.

Portland's urban-growth boundary restricts new subdivisions from spreading across farmland. That prevented the massive oversupply of homes that's slugged other cities.

That said, economists warn that 2008 doesn't look good -- even in Portland. "You can take some comfort that it's better here, but it's going to get worse," said Bill Conerly, an economics consultant from Lake Oswego.

Portland will continue to get some spillover damage from the subprime mortgage troubles this year. Mortgage lenders have upped their requirements for down payments and other lending requirements. That will continue to reduce the pool of buyers in Portland.

Even the Case-Shiller figures showed Portland's values have begun to decline slightly when comparing September's figures to the month before.

That may provide buying opportunities for some. But others who bought at the peak or maxed out home equity credit lines may find trouble if they have a life emergency, such as divorce or job layoff. Flattening home values also means less money coursing through the economy. People will have thinner home equity and less opportunity to tap it for a car or home repair.

Global Insight, a research firm, predicts the Portland-area's economy will lose $303 million in 2008 because of the mortgage troubles, according to report released this week for the U.S. Conference of Mayors.

Crews Cutts, the Freddie Mac economist, expects Portland's home values will be flat in 2008.

She added: "Flat is good when everyone else is going down."

Comparison shopping

Jacinda Kirk, the Seattle renter, would like to see prices come down. She keeps clicking through the Internet in search of a deal in Seattle or Portland.

Kirk, who's married with an infant son, recently found a Beaverton home with a yard on a corner cul-de-sac lot. It's 1,900 square feet, four bedrooms and has 21/2 bathrooms.

Price: $350,000.

In Issaquah, a Seattle suburb, she found a 1,700-square-foot, four bedroom and 21/2 bathroom townhouse with no grass for her son to play.

Price: $440,000.

"If we're going to spend $400,000 for a house," she says, "we at least want a yard."

Ryan Frank: 503-221-8519; ryanfrank@news.oregonian.com

©2007 The Oregonian

Back