December 2002 Newsletter

by Susan Marthens

Portland Home Market

October 2002 Residential Highlights

Some records were broken in the Portland metro area during the month of October 2002. The number of pending and closed sales reached totals not seen in any other October on record. Compared to last year alone, closed sales increased 11.0% and pending sales increased 6.0%. New listings, while not breaking any records, also surpassed the total from October 2001, by 9.1%.

With the number of new listings lagging behind listings taken off the market, the Portland metro areas inventory has also reached a notable level. Given the rate of sales and the total of active residential listings at the end of October (10,356), the inventory would last 4.7 monthsless than recorded for any previous October.

Appreciation

The median sale price in the Portland metro area has appreciated 3.0% to $175,000 (from $169,900) when comparing the last 12 months to the 12 immediately prior. At the same time, the areas average sales price is up 4.1% (208,800 v. 200,600).

Affordability

At the end of the third quarter, the median sale price in the area was $179,000; HUD reported the areas median household income was $57,200; and Freddie MAC reported an interest rate of 6.09% for a 30-year fixed mortgage. With these figures and an NAR formula the affordability index reached 137. It indicates that a median-income household would have 37% more income than necessary to afford a median-priced home.

Cost of Residential Homes in the Portland Metro Area

Area

Average
Sales
Price

Percent
Appreciated
 **See note

North

8.5%

Northeast

6.6%

Long-Term Mortgage Rates Rise Slightly

November 28, 2002 

In Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 6.13 percent, with an average 0.6 point, for the week ending November 28, 2002, rising from 6.03 percent last week. Last year at this time, the 30-year FRM averaged 7.02 percent.

The average for the 15-year FRM this week is 5.57 percent, with an average 0.5 point, up from last week's average of 5.44 percent. A year ago, the 15-year FRM averaged 6.53 percent.

One-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 4.19 percent this week, with an average 0.5 point, up slightly from last week's average of 4.14 percent. At the same time last year, the one-year ARM averaged 5.22 percent.

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

"Mortgage rates have been so low and accommodating that total home sales surged in October as families took advantage of the affordable atmosphere," said Frank Nothaft, Freddie Mac chief economist. "And with increased loan limits in 2003, Freddie Mac estimates that about 250,000 more families will qualify for the lower rates available in the conventional, conforming market.

"In addition, over the last four months mortgage applications for refinance have been about 70 percent of applications or greater, according to the Mortgage Bankers Association, as current homeowners also take advantage of borrower-friendly rates."

Portland Area Mortgage Rates

To check on local mortgage rates go to Bankrate.

Portland Area Mortgage Brokers

To talk with a mortgage broker, consider: 

• Associated Mortgage Group   They are licensed in both Oregon and Washington.    Telephone:  (503) 221-0064  Fax:  (503) 221-0396.  Mr. Dave Jolivette is the contact.
• Mortgage World  Telephone: (503) 292-4900.  Mr. Tim Bolen is the contact.
• Stevens Mortgage  Telephone: (503) 670-0535  Fax: (503) 670-0481.   Mr. David Dishman is the contact.
• Windermere Mortgage Services  Telephone: (503) 497-5060 or (800) 867-1337.  Ms. Cynthia Rockney-Wilson is the contact.  Also Bertha Ferran at (503) 464-9215.

You may want to read our Privacy Policy with regard to recommendations.

Portland's Winter Weather
Tracking the Moisture

Water Year:  October 1 - September 30

Portland's rainfall is measured according to the "water year" which is from October 1 through the end of September.  Since we only receive a few inches in the summer months, the rain months are from October through May.  Almost half of Portland's annual rainfall falls in November, December, and January.  Our average water year precipitation is about 40 inches.

Water Year:  Measurements From Portland Airport Weather Station

Report on Rainfall for November 2002 - Off 50%

The month of November as well as October has been like fall on the East Coast - sunny days and just a spot of rain.  Most of the days in this November have temperatures in the high 50s and low 60s.  It rained (snowed in the mountains) in mid-November for a week, and the ski resorts opened on Mt. Hood.  Then came warm and dry weather so many of them closed.  Only the high-speed Palmer lift (8,000 plus feet) at Timberline Ski Area is still operating.

Is This a Drought Year?

It is too early to predict, but things don't look good. A dry winter is as bad (or worse) as an extremely wet year.  Oregon depends upon winter moisture for agriculture and recreation. Fish thrive in moist years.  We need snow in the mountains - it's essential to the farmers and ranchers for summer irrigation.
 

Are Home Prices Rising Too Fast?
2nd Quarter 2002 West Coast Housing Prices

During the past summer, our daughter and son-in-law sold their modest row home in Washington DC and purchased a single-family detached home in Maryland to accommodate their growing family.  After four years of ownership, they almost doubled their investment on the row home even after doing some updating to the home.  Of course, they had to pay a premium price for their new Maryland home so whatever was gained was quickly spent.  We were somewhat concerned when they purchased the home in 1999 as the price seemed high by our Portland-based standards. Their new Maryland home price was shocking.  But we realized from our reading and research that homes in the Washington DC metro area have appreciated in price 16-20 percent annually the last few years.

Nothing is worst than watching family and friends lose thousands of dollars on their home.  This happened to people who purchased homes on the East Coast area during the early 80s and the bottom fell out of the market in the late 80s.  It's especially difficult for families who have to move because of job changes, need for a larger home, etc.

First-Time Home Buyers Powering Portland Home Buying

First-time home buyers have powered the Portland-area home market through the state's economic quagmire. They are one big reason that housing prices and sales have held steady even in a state with one of the nation's weakest economies. These buyers, younger and less affluent than second- or third-time home buyers, also are shaping trends in the market. They flock to neighborhoods close to downtown Portland. Competition is stiff for homes under $200,000, while higher-priced homes sales have slowed.  "A large proportion of the sales we're involved in are first-time buyers," said Ron Rudy, president of Portland Mortgage. "Now is just the perfect time to be buying a house, just because of the affordability issues." 

Fed's Role in Housing

The Fed's broader goal is to stimulate a U.S. economy struggling to regain strength after recession. The housing market provides the most vivid illustration of how low interest rates can encourage consumers to make purchases.

Mortgage rates are not directly tied to the lowering of interest rates by the Federal Reserve, although they trend in the same direction. Mortgages are more closely tied to the 10-year Treasury note, which can fluctuate based on factors that include the direction of the stock markets.

The Bubble Debate

Some economists worry the rapidly escalating real estate markets on both coasts could be part of a speculative bubble, similar to the stock market of the 1990s. The concern is that prices pushed higher by eager buyers during the economic boom cannot be sustained.

Ingo Winzer, owner of the Market Rate Monitor in Wellesley, Mass., named Portland as one of 13 markets overpriced by 21 percent to 30 percent in the November issue of Consumer Reports magazine.  Winzer bases his work on the historical relationship between housing prices and incomes in a given area. 

However, he said despite the drama of his estimates (which can vary by 10 percent) the numbers don't indicate major problems in Portland. "The trends right now don't look like the bottom of the market is going to fall out," he said in mid November while in Portland. "I think the threat of prices coming down a lot, and by a lot I mean 20 percent, is pretty low."

Housing Prices - 2nd Quarter 2002

Portland Area Price Appreciation

In the Portland area, price appreciation in the first nine months of the year has been modest about 3 percent over the same period the year before. This figure includes both existing homes and new homes.  A gradual increase in prices is considered healthier than rapid increases. Home prices in the metropolitan area soared by 9.1 percent in 1996, at the peak of the state's economic boom.

The last time prices declined in the Portland area was during the recession of the early 1980s, said Neal Higgins, publisher of the Portland-based Real Estate Report.

Typically, in market bubbles, prices stagnate or decline slightly. Rarely do home prices drop significantly as stock prices did after the run-up of the 1990s. The last time housing prices fell nationally for a sustained period was during the Great Depression, when values fell about 30 percent, according to Freddie Mac.

Underwriting Standards Remain Static

Major Portland-area lenders, which face the most risk if prices decline, have not been changing their underwriting standards for fear of a bubble. When lenders see higher risk in a market, they make it more difficult to obtain loans.

"We haven't seen our underwriting packages change," said Dennis McAuliffe, area manager for Wells Fargo Home Mortgage. "The rate environment is conducive to a strong market. . . . Our forecasters think we are going to be in a decent to good rate environment over the next year." The high-end market does show weakness. For example, sales of higher-priced homes in the Lake Oswego and West Linn areas have slowed, Higgins said.

But even expensive homes can sell if they have the right combination of location and panache. Condominiums and lots in the Pearl District continue to sell well, even for $500,000 or more. "I don't think there is a first-time home buyer down there," said Jeff Geisler, owner of Pacific Real Estate. Geisler said he has sold seven properties in the past 60 days near downtown.

Yet the Pearl District is the exception, real estate agents say. It is first-time buyers lured by low rates who are keeping the Portland market hopping.
 

Southeastern Oregon Steens Mountain Wild Mustangs

In 1971 the Wild Free-Roaming Horse and Burro Act was passed by Congress to protect all wild horses and burros on public lands.  The Bureau of Land Management (BLM) was given the responsibility to protect, manage, and control these wild populations.

Kiger Mustangs were discovered in the mid-70's during what was to be a routine gathering by the BLM. This took place on public lands in Southeastern Oregon. During the roundup of an isolated band of horses on the high desert of Burns, Oregon, government officials agreed that they had happened upon a very different and special kind of horse. Knowing this, they introduced the small band into another isolated area on the north end of the Steens Mountain near Kiger Gorge, hence the name of Kiger they currently bear.

The Kiger Mustangs, thought to be one of the purest herds of Spanish mustangs existing in the wild today, may be the direct descendants of the Spanish Barb horses brought to North America in the late 16th Century.  Among their unique physical characteristics are dun and buckskin colored coats, zebra stripes on knees and hocks, hooked ear tips, and fine muzzles. The BLM manages these animals to preserve their wild, free-roaming nature, maintaining a healthy viable herd in balance with the environment. The herd numbers up to 300 animals.

The Bureau of Land Management has developed a wild horse viewing area accessible to high clearance vehicles from Happy Valley Road but passable only in dry weather.  The Kigers and other mustangs can occasionally be seen at BLM's wild horse corrals.  Tours of the facility, located on U.S. Highway 20/395 a few miles west of Hines, can be arranged at the Bureau of Land Management office in Hines.

Steens Mountain

Located 60 miles south of Burns in southeastern Oregon: In summer, you can drive to the top of this 9,670-foot-high fault block mountain to look over the Alvord Desert more than 5,000 feet below. Because of its unique geology and ecological diversity, Steens Mountain was designated a National Monument in 2000.

Frenchglen is the most commonly used gateway to the Steens.  From this small town Steens Mountain looks unimpressive and belies its 9,670 feet elevation.  The western slopes of the Steens rise in what looks like a series of gently tilted grassy slopes.  The highest ridges are 20 miles east of Frenchglen and 4,500 feet higher.

Links

Visit the Kiger Mustangs Association website to learn more about these magnificent animals.  The site has some great photos of the mustangs. 

Phil Kessinger, Educational Media Consulting in Eugene, Oregon has created some pages on his EMC website that are packed full of information and photos about the Steen Mountain area. 
 

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Susan Marthens
Real Estate Broker, GRI
(503) 497-2984
Fax (503) 220-1131

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