Real estate's soft landing
Realtors and developers see some slowdown but overall, the Portland area seems to be bucking national trends

Thursday, December 06, 2007

DANA TIMS
The Oregonian

Two years ago, Lori Loen, a real estate broker for the Hasson Company, knew exactly how she would spend her days -- scouring the southwest suburbs, searching for more land to feed an insatiable housing market.

A lot has changed since then for Loen and virtually everyone else involved in the region's housing industry.

The scramble to lock up land for new residences is largely on hold as unsold housing inventories have climbed and many potential buyers are clinging to the fence, waiting to see whether the national economy will sink into recession.

But Loen and others are quick to note that, far from the homebuilding disasters occurring in some parts of the nation -- parts of Florida, Colorado, Arizona and Nevada are going up in figurative flames -- the cooling here is merely putting the industry back on par with what used to be called a "normal" year.

"Things have changed, certainly, and the market is definitely slowing around here," said Loen, whose duties include overseeing sales of 12 custom-built houses in the Morrison Estates subdivision near Lake Oswego's Kruse Way. "But if the only thing people are reading are the headlines, they may be missing the larger point that there's still a lot of overall strength in the market here."

A smattering of statistics underscores that the suburban housing market, and corollary efforts to buy raw land for new houses, have slowed.

The average price of homes sold in Lake Oswego in 2006, for instance, was $596,600, Lake Oswego Realtor Adelle Jenike said, citing monthly data provided by RMLS. So far this year, that number stands at $547,700.

Homes sold in Sherwood last year rang in at an average $374,100. That figure has slipped this year to $355,999.

"The prices of homes have dropped, no doubt about it," Jenike said. "But we're not seeing anything like the horror stories on television from around the country."

In October, according to the same information, the Portland area had an 8.4-month inventory of homes for sale. It's the highest rate of inventory since January 2000, when the figure topped 10 months.

In October 2006, by contrast, the inventory was 4.6 months. In 2005, when the area housing market was red-hot, that figure had dropped to 2.2 months, representing one of the lowest inventories in years.

"Two years ago, we all thought things were insane and probably unsustainable," said Ken Gertz, owner of Gertz Construction in Tualatin. "But by any long-term measures, the Portland market itself is still very strong."

For years, Gertz has had his own way of gauging when the housing market is in a nose dive. It's when the many subcontractors he works with -- framers, electricians, concrete specialists -- start calling, hoping to find work that isn't materializing elsewhere.

"When those guys are ringing my phone off the hook, that's when I know things are really slow," Gertz said. "But they aren't calling. Everyone is busy. Everyone is working."

Other parts of the state, he added, aren't keeping up. Jackson County, for instance, has slowed dramatically in recent months.

"And Bend is a tomb," Gertz said. "But we all knew that. There was no way it could sustain the level of growth it had seen the past two or three years."

Many factors are working to keep Portland and its southwest suburbs out of the tank, Gertz and others said.

One is the region's urban growth boundary. It limits sprawl into adjacent rural areas and helps prevent the sort of housing gluts that have hit cities such as Boise and Las Vegas.

"The urban growth boundary also helps new and existing houses in urban and suburban areas maintain their value," said Jim Chapman, president and general manager of Legend Homes in Tigard. "It helps ensure that supply and demand never get too far out of sync."

Chapman is convinced that the buying, selling and building of homes in suburban Portland won't return to the overheated climate of early 2006.

"But that's OK," he added. "I'm a native Oregonian, and planning and farm protection is important to me, too. Yet despite some reports nationally, we're still seeing a reasonable rate of growth here. It's healthy and good for everyone."

Other factors working to minimize instability in the area's housing market, analysts said, are a continued influx of potential buyers from out of state, continuing low interest rates on 30-year mortgages, and relatively strong job growth.

Anyone caught in a pinch right now probably responded to boom times two to three years ago by buying too much land and putting up house after house, said Brad Wurfel, spokesman for the Home Builders Association of Metropolitan Portland.

Randy Sebastian, founder and president of Renaissance Development in Lake Grove, has projects elsewhere, although he specializes in the southwest suburbs. The recent market slowdown has greatly limited how much land developers such as himself are acquiring, he said, but it has also placed a huge premium on ensuring that new sites be interesting and, ultimately, compelling for potential buyers.

One project he is launching in Wilsonville, for instance, will feature 38 houses on the Willamette River at Wilsonville. Each house will have a boat slip.

Another, in Lake Oswego, will offer 18 houses on lots averaging 15,000 square feet.

"It's not about quantity anymore," Sebastian said. "It's all about quality."

In terms of net sales, Renaissance expects to sell just over 250 houses this year, down from last year's 316.

"Certainly, we've dropped a bit," Sebastian said. "But when your average sales price is $550,000, we're still finding plenty of people who want to own a home."

At the fledgling Villebois master-planned community in Wilsonville, developer Rudy Kadlub is still planning to start construction Jan. 2 on the 73 rowhouses, townhouses and condominiums that will form the village center.

"We're continuing to take a very aggressive approach," said Kadlub, founder of Costa Pacific Communities. "The more 'there' we create, the more overall traffic there'll be."

Kadlub attributed the slowing in building and land development to general uncertainty in how the economy is likely to perform during the next 12 to 18 months rather than with any fundamental problem in the economy.

"We still have positive job growth and year-to-year appreciation in housing values," Kadlub said. "It still comes down to housing being a good investment here."

Arbor Custom Homes, based in Beaverton, is one of the builders involved with Villebois. Overall, the company expects to build and sell more than 600 houses by year's end.

"Market conditions have definitely changed, and they are forcing us to be more strategic and more efficient in our planning," said Ralph Goldman, the company's marketing manager. "But there's no mass hysteria out there and, from our standpoint, we're still seeing many more positives than negatives."

©2007 The Oregonian

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