It only gets better from here

May 24, 2008

Another great article that vindicates a lot of what many of us have been saying was written recently.  The Wall Street Journal published an article written by Cyril Moulle-Berteaux on the 6th of May.  This article nails it!


It states that April will show that it was the bottom of the housing decline.  We feel that in our sales offices and what we hear amongst our peers.  Buyers are starting to feel a bit more confident and are starting to revisit the housing market.  More positive news like this Wall Street Journal article and our local new channel 6 had a great story about the Portland housing market last week all help rebuild the confidence that has been lacking in our market place.  We still hear plenty of negative press, but we will always hear that.  When the market turns around then it will be bad press about how unaffordable it is.  Most of the naysayers won’t find anything positive no matter what direction the market goes.  However, for the rest of us it is improving.  Ever it be so slowly, it is improving.


One theory that I have heard before and was addressed very well in this article is the belief that prices must drop another 30% before we get back with where they’ve been historically.  However, the article reads; 


“This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.


“Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.”


The national trends that are mentioned in this article are being realized here in Portland as well. The article addresses the fact that home inventories have been falling over the past months.  Here in Portland, RMLS reported that we had 12.8 months of unsold inventory in January.  By March we were down to 9.1.  We have seen an increase back to 10.1 in April however; an increase in inventories is historically in line with this time of year.  We have seen a 6.8% increase in pending sales from March to April.  Of course, all that will be referenced by the naysayers in their blogs and stories is that sales are down from last year with no mention of the increase in sales month to month since December of last year.


The National Association of Realtors has also just reported that, “buying a house in the Portland metro area is once again affordable for a family earning the median income.”  All the more reason to get into this market now and stop listening to those who continue to say the sky is falling in spite of the facts that things are improving.



A link to the entire WSJ article is provided below:

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