Oregon's Housing Mess
Has Oregon’s housing bubble burst? Oregon's home prices are still 5.4 percent above the median home price in mid-2006 when the economy started its decline, but that margin has steadily been shrinking in recent months.
It is no surprise that prices have fallen since then and there is no sign of improvement, according to industry professionals. In the last three months, the median home price has fallen 4.6 percent. This amounts to more than a $13,000 drop in the median home price.
For the people who financed their home purchase with no money down, or who signed up for creative mortgages with less than 20 percent equity – you may be in trouble.
“People are lucky to get 80 to 82 percent financing, and that’s with full proof of income and four points,” said Aaron Freels with Wells Fargo’s subprime division in Oregon. (Points are the cost of doing a loan that is normally financed into the balance and payment amount.)
Not only are home buyers stuck in their current house, he said, but refinancing may not be an option if they have an adjustable rate mortgage.
With home prices decreasing throughout the country, and people being stuck with mortgage payments they cannot afford, bank foreclosures are rising. This bad debt that banks are incurring is spilling over into other loan portfolios such as auto loans and credit cards. This makes it harder for everyone to get credit and usually at higher rates.
The current economic outlook for Oregon's housing market is mixed. HousingTracker.net tracks the current inventory in the state, and has recorded a drop in inventory over the last three months. This can be a sign of buyers moving into the market, or homeowners losing confidence in their ability to sell. If buyers are moving into the market, this will help stabilize prices. On the other hand, Oregon’s housing mess could be far from over if homeowners are losing confidence or are not able to sell their homes due to being “upside down,” in which they owe more than their home’s worth.
Oregon was late to react to the decline in the housing market, but recent data shows Oregon is now declining more than the rest of the country. According to the Federal Housing Finance Agency, the U.S. home prices fell 5.9 percent in the last 12 months. Meanwhile, Oregon’s housing prices fell 7.5 percent. The data can sometimes be skewed because of the different markets that make up the state.
“Oregon has multiple markets within the state, the first decline started in Central Oregon, followed by Medford, and lastly the coast and Portland,” Freels said. Sometimes data can be skewed, he said, based on one or two really poor markets, while most of the state can be fairly stable.
Hopefully Oregon can rebound from this housing disaster faster than we got into it. Certain areas of the U.S. market are already showing signs of improvement, but only time will tell how long Oregon will remain in this mess.
Freels remains optimistic. “We will recover from this downturn in the business cycle with the government playing a role and banks being more grounded with their lending policies,” he said. “I have the upmost confidence.”