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Many economists and so-called experts on national real estate seem at least a little confused about the direction that real estate sales and prices will take in 2008. But is it any wonder? Rather than a meltdown, the experts in 2005 were forecasting a soft landing for real estate markets in the coming year, and a return to normal sales and prices after that. Oops! I guess they were a little off on that one. But the national and local pictures have been different. While the market nationally was starting its downward spiral, the market in NW Oregon was still shooting skyward. As prices nationally declined in 2007, prices in NW Oregon continued to rise. (For more on that, see Local Market Trends.) Although 2007 went in the books as a strong year for prices, the number of sales sagged throughout the year. Meanwhile, new listings were on the rise. Some experts say Oregon tends to lag behind the rest of the nation in many trends. The economy is no exception. This leads me to speculate that price declines in the national market may trickle down to NW Oregon this year because sales have been flagging while new listings have been continuing to rise. It's simply the law of "supply and demand." If the supply of a commodity increases relative to demand, then prices will decline. And that seems to be where our real estate market is heading this year. But I don't expect declines to be massive, and I don't expect home sellers will have to give back much of the phenomenal market appreciation that NW Oregon homeowners accrued since 2001. Even if the national economy slides into recession, Oregon's economy may take a year or more to do likewise. This should soften any blow this year to the NW Oregon real estate market. But NW Oregon prices have to give sometime. They have been rising so fast that many local wage-earners can no longer afford to buy a home, or even a condominium. Meanwhile, Oregon employee wages have not been keeping pace with the run up in real estate prices. A 2007 survey by the National Association of Realtors® showed that the Portland metro area had among the least affordable homes in the nation. Even though prices in the area are modest compared to many high-value markets, incomes are remarkably low by comparison. Unless incomes begin to rise substantially in the short term, which is unlikely, home prices will have to begin declining eventually. Moreover, rising food and fuel prices have been cutting into the amount of money that home buyers have available to purchase a home. And don't expect that to change any time soon. As long as prices for gasoline and diesel continue to rise, the amount of money potential buyers have available will decline. And I wouldn't be surprised to see prices for regular gasoline reach $4 per gallon in Oregon sometime this year. Nationally, look for the steep declines in sales and prices to begin to moderate. The tables below give a statistical view of how some economists expect the nation's economy and the residential real estate market to perform in 2008, along with comparisons for previous years. Single-Family Home Sales
Multi-Family Rentals
Economic Indicators
* Estimated ^ Projected 1. Includes sales of condominiums and cooperatives. 2. Condo and co-op sales only, and not other existing-home types. 3. Percent increase in Consumer Price Index ("core inflation"); does not include price increases of food or energy. 4. Average nominal rate for 30-year, fixed rate mortgage. SOURCE: National Association of Realtors® |
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| Craig Loughridge has been an Oregon-licensed real estate practitioner and consultant since 1999. He has represented buyers and sellers in dozens of real estate transactions involving millions of dollars worth of residential, agricultural and investment properties. He is a graduate of the Oregon Realtor® Institute, and a member of the elite Real Estate Buyer's Agent Council. He can be reached at 503-632-8258. |  |
