February 2008 Market Action Report
Mar 17th, 2008 | By Bob Broad | Category: Market UpdateRMLS released their RMLS February Market Action Report on the state of our local housing market. What typically gets reported after these monthly reports is the change in our mean home price, and perhaps something about housing inventory. Portland remains one of a few major cities that continues to report rising home prices, although the year-over-year increase is about 1/4 of 1 percent. The mean home price is up to $280,000 from $279,000 last February.
It’s better than almost all of the rest of the country that is living through declining home prices, but is the Portland real estate market in a better position today than it was a year ago? Better than it was in January? To start answering those questions, it’s worth looking at some of the leading indicators in the data to see what they suggest will happen over the months to come.
Last month we reported over one year of inventory on the market. It was a record. A January inventory spike is clearly a seasonal event where closed sales dip following the slow selling months during the winter holidays. New listings spike when January hits, but the bigger cause for the inventory spike is in many ways definitional, and not that big a deal. The total inventory gets expresses as a product of the January sales rate, and that’s why our inventory ballooned. In February, the number of homes in inventory increased significantly. Since February sales were 30% higher than January, the months of inventory fell by two months - a dramatic “improvement.”
To get a better sense of the significance of the recent drop in transaction volume and build-up of residential properties on the market, examine the chart below. You can see the market seasonality, but also dramatic inventory build over the past two months. If March sales “rebound” to historical seasonal high levels, this build-up might prove to be a blip before a return to “normal” seasonal sales trend and a more balanced market (closer to six months of inventory). Seasonally strong buying would stabilize prices, work off some of our existing inventory, and trim time from the average time a home is on the market before being sold. If March volume is “soft” it looks more likely that home prices will fall.
A deeper look across the metro region at inventory build, accumulated inventory, and time-on-market suggests that the properties inside the City of Portland (See note #1, below) are less vulnerable than properties in the Eastern Suburbs (#2), Western Subrubs (#3), and Lake Oswego-West Linn area. In subsequent articles we’ll dive into a deeper analysis of each of these areas of our metro market.
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