Portland Home Prices Finally Fall in March
Apr 3rd, 2008 | By Bob Broad | Category: Market UpdateI have been coached by another real estate blogger about methodology issues that have most-significantly over-inflated my inventory estimates. I didn’t back out listings that have been canceled and withdrawn from the inventory estimates. Also there are transactions that will be included in March numbers, but not posted on March 31 when I pulled data. I omitted a couple of regions. I have not had a chance to dive back into the data since I received this counsel, but it looks like it has skewed my pricing estimate a few points low. Inventory differences will be much larger – essentially flat from February.
Revised
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I will update the remainder of this analysis later.
Portland Real Estate Market Analysis
Portland housing market has been one of three markets that have defied the national correction in home prices. That is until March. In advance of the RMLS Market Action report, the Cafe estimates that Portland home prices in March of 2008 are approximately 1.7% lower than they were in March of 2007.
This is the first year-to-year decline for our housing market, using RMLS data.
Note: Case-Shiller reported a drop in metro Portland real estate prices. I believe that the difference is the market definition: the Case-Shiller includes Clark county in Portland Metro, and RMLS reports Portland and Vancouver separately.
We’re also predicting that RMLS will report a dramatic increase in home inventory (absorption) when they release March data. The cafe estimates that it would take 17 months of selling at the March sales rate to clear our market of housing inventory.
I have assembled my prediction by looking at the trends in the various Portland area RMLS regions, and created an aggregate estimate for the market as a whole. See table below to see our methodology:
The significant increase in housing inventory across the metro area is a key predictor of future pricing declines. This past month home sales were down dramatically v. last March in every region of Portland. This chart below clearly shows the problem is demand-related. Price is the solution: sellers that need to sell can stimulate demand by lowering their price. We expect that Portland home prices will continue to fall through our peak 2008 “selling season.” If you you’re serious about selling, the general rule should be to price more aggressively that your competitors today in order to avoid following the market down.
The healthiest regions in our market are not surprisingly the close-in city neighborhoods. The Portland Regions: North Portland, Northeast Portland, Southeast Portland, West Portland, and NW Washington County all have less standing inventory than the market average. Prices have continued to appreciate in North Portland, Northeast Portland, West Portland, and Lake Oswego. We will follow this article with a series of region and zip-code specific analysis.
Related posts:
Bob, I answered you on Portland Housing Blog - where pessimism is the new optimism - but I just figured out what you’re doing wrong: You’re using the Market Trends template, which A) delivers average price, not median; and B) doesn’t calculate expired, canceled or withdrawn listings into its Accumulated Inventory stat. That’s why, if you decrease the number of months in the calculus, the AI goes down.
JK
Interesting data gentlemen. Can you clarify how you measure supply and demand in the last chart?
I assume supply is the number of houses on the market, but is demand the number of closed sales?
I’ve seen other Realtors predicting a 1-2% increase in March, kudos for having the guts to predict a decline.
Jeff.
You’re correctly identified my methodology, and appreciate the guidance.